Difference between Stock Market and Stock Exchange
People typically invest in the financial sector in order to earn a little bit more money. As a result, they are unfamiliar with money market terminology. Terms like “share,” “stock,” and “equity” are challenging for a novice to comprehend. But not knowing anything clearly can be problematic.
Before starting to invest, an investor should be conversant with these words. It makes sense to invest intelligently if you understand what they mean. In this post, we will discuss the differences between the stock market and the share market. The distinction between the stock market and the share market may not always be clear to a novice investor. They experience blurred vision as a result. First, let’s dissect the phrases to determine their individual meanings.
What are shares?
People typically invest in the financial sector in order to earn a little bit more money. As a result, they are unfamiliar with money market terminology. Terms like “share,” “stock,” and “equity” are challenging for a novice to comprehend. But not knowing anything clearly can be problematic.Before starting to invest, an investor should be conversant with these words. It makes sense to invest intelligently if you understand what they mean. In this post, we will discuss the differences between the stock market and the share market. The distinction between the stock market and the share market may not always be clear to a novice investor. They experience blurred vision as a result. First, let’s dissect the phrases to determine their individual meanings.
What is stock?
When it comes to stocks, the word literally means a group or aggregate of something. Stocks are the collection or accumulation of a company’s shares, to put it in the context of a company’s holdings. Stocks reflect the percentage of a company that a person, whether an individual or not, owns. Although a firm can only issue a certain number of shares, an individual can own an unlimited number of shares in their portfolio. It can be a component of the person’s portfolio and be a part of one or more companies, as was previously described.
To further comprehend the idea of stocks, let’s use the aforementioned example once more.
For example 100 shares of Company A are held by Mr. X. There are 1000 shares in all that the corporation has issued. This indicates Mr. X. holds 10% of the company’s stock. Furthermore, if Mr. X also owns 200 shares of Company B, with a total of 4000 shares, he owns 5% of Company B, making his overall holdings in his portfolio 10% of Company A and 5% of Company B.
What are the basic differences between stock and shares?
After understanding the basic meaning of the two terms shares and stocks, let us not consider the basic differences between the two.
| Category | Stock | Shares |
| Meaning | Shares represent the ownership of the person in a particular company. | Stocks represent the ownership or the share of the person in one or more companies. |
| Original issue | Stocks do not form part of the original issue by any company. After the issue of shares, they are converted to stocks. | Shares form part of the original issue by any company. |
| Nominal value | Stocks do not have a nominal value attached to them | Shares have a nominal value that is allotted to every share of the company. |
| Transfer | Stocks are a bundle of shares. Hence, it is possible to transfer them in fractions. or smaller portions. | Shares of a company can be transferred in lots but not in fractions. |
| Maximum number | There is no limit to the maximum stock that can be held by a person in their portfolio. Stocks can be from one or multiple companies hence, for investors, the sky’s the limit when it comes to accumulating stocks. | When a company issues shares, they are in a definite quantity. Hence, there is a ceiling on the maximum number of shares of a company that can be held by any person whether (individual or not). |
| Paid-up value | Shares can be converted to stocks only when they are fully paid. Hence, stocks are always fully paid up | Shares, on the other hand, can be fully paid up or partly paid. |
| Types | Stocks are usually of two broad categories – Common stock and preferred stock. These stocks can be further classified as a growth stock, value stock, income stock, blue-chip stocks | Shares can be of a private company or a public limited company. These shares are broadly categorized as common shares or equity shares and preference shares. Such shares can further be fully paid or partly paid shares. |
| Denomination | Stocks held by an investor can be of different companies and hence can have different denominations | Shares of a company have the same denomination irrespective of the times they are issued. The only change in the denomination of the shares is in the case of splitting of shares. |
What is the impact on dividend and voting rights?
Having stock in a corporation also entitles you to dividends and the ability to vote. A shareholder’s voting and dividend rights increase with the number of shares they own. The voting rights are typically not changed when these equities are converted to stocks. A private limited company may, however, issue various classes of shares for the general public and promoters, with each of the promoters’ shares potentially having a larger voting right than ordinary shares, or a private limited company may be converted to a listed corporation.
Conclusion
Shares and stocks refer to different things. However, one of these is frequently substituted for the other. It is nonetheless crucial to comprehend the fundamental distinctions between them in order to better grasp the markets and their intricacies, even though it typically does not lead to any significant misunderstanding or grave errors (particularly for small investors) in understanding an investment.
FAQS
The most common ways of earning money from the stock markets are by selling the shares at a profit (capital gains) or through dividends declared by the company on the shares.
The key to having a profitable portfolio is by investing in fundamentally strong stocks and having a diversified portfolio. Investors should also aim at a long-term investment horizon to reap maximum benefits.
Blue-chip stocks are the stocks of companies that are usually the market or segment leaders and have consistently performed well over decades.
Preference shares are a class of shares issued by the company that has a preferential right of dividend as well as at the time of liquidation of the company. These shares, however, do not have any voting rights.