Stocks vs Shares – All You Need To Know

Most of the times, the difference between stock and share is not evident enough to be taken note of. Therefore, people use both the terms interchangeably to talk about the equity of a company. However, there is a major difference between stocks vs shares that should be known to all.

Before we detail the difference, let us see what both these terms mean:

Stocks vs Shares – Definition

Stock refers to the equity ownership in a company or companies. This means that an individual holding the stock in a company has ownership in the company. These individuals have the right to profit, assets and dividend. Stockholders not only get the dividend but also have the voting right and may form a part of the board of directors.

Share, on the other hand, represent the ownership in a single company. The ownership in the company is directly dependent on the number of shares that a shareholder owns. For instance, one investor has 50 shares and the other person has 100 shares, then the one with 100 shares has more voting right.

Stocks vs Shares – Differences

Following are the differences between Stocks vs Shares:

Basic Difference

One of the simplest ways of explaining the difference between stock vs share is that while the former is a large collection of shares, the latter is just a small unit of stock. Share is the single unit of the share capital of the company, which defines the ownership of the shareholder. Units of shares collectively held by an individual in a company are known as stock.

Relation

Share is the smallest unit in which the capital of a company is divided. Stock, however, is used to denote the collection of shares.

Relationship with Owner

If an investor owns shares of many firms, one can say that he or she owns the stocks. On the other hand, if an investor owns the shares of a particular company, one can say that he or she owns shares.

Term

Stock is a generic term to denote the shareholding of an investor. On the other hand, share is a specific term. For instance, if we say A has invested in stocks, it could mean that A has a portfolio of shares. And, if we say A has invested in shares, then the next question could be of which company and how many shares.

While stock is fully-paid up, shares could be partly or fully paid up.

Shares vs Stocks

Type of Stocks and Shares

There could be various types of stocks. Usually, the stocks are classified as per the company which issues it. If a tech company is issuing a stock, then the stock is an IT stock. Likewise, if a financial company is issuing a stock, then it is a financial stock. Similarly, there are growth stocks, blue-chip stock, value stocks, small cap, mid cap, large cap stock and so on.

Share, on the other hand, could vary depending on the rights and features associated with it. For instance, there could be preference share, right share, common share and so on. Preference shares are just like bonds for the shareholders as they guarantee the dividend. Similarly, there could be many types of common shares on the basis of voting rights they enjoy. For instance, Class A common stock might get one voting right per share and Class B might have 10 voting right per share and so on.

Dividends and Voting Rights

Though owing both stock and share give you a dividend and voting right. But, how much dividend or voting right you get depend on the number of shares you own. Both dividend and voting right is decided on a per-share basis. So, more the number of shares you own, the more voting right you get.

Importance

Share is a more important term than stock. Understanding shares will help you to understand the concept of par value, face value, discount, premium and more.

Value and Denomination

While shares can have a nominal value, stocks do not have nominal value. On the other hand, shares have equal denominations while stock will have unequal denominations.

Which is More in Use?

The usage of the term stock or share mainly depends on two things:

Geography

Often the use of the term also depends on the country you are in. For instance, people prefer to use the term stock in the United States when discussing equity. Elsewhere in the world, the share is more commonly in use.

Professional Standing

Market role of a person also justifies to some extent the use of the term share or stock. For instance, the analyst might often prefer the term stock, whereas the stock broker will mostly ask the investor to specify the number of shares they want to buy.

Final Words

As said above, the primary difference between the stock vs share is what they refer to. The term stock is generally in use when talking about the equities markets in general. On the other hand, the share is usually is use when talking about a unit of measure. Apart from this, there is no other major difference between the two, and thus, it may not be wrong, if you are using the terms interchangeably.1,2

1.
The Differences Between Shares And Stocks – FXCM UK. FXCM UK. January 2020. [Source]
2.
difference-between-stocks-shares. zacks. January 2020. [Source]
Last updated on : January 15th, 2020
What’s your view on this? Share it in comments below.

Leave a Reply