Basic charcteristics of shares

SHARES OR STOCKS?

That’s right. The first step is to clarify that point.  ‘Shares’ and ‘stocks’ mean the same thing. Shares are collectively called stocks. So if your friend says that he owns stocks, what he means to say is that he has bought shares in many companies. But if he says he owns shares, he’s being specific there. What he means to say is that he has bought shares of a particular company.

CHARACTERISTICS OF SHARES

Shares have these following distinctive characteristics:

Ownership rights.

When you buy a share, you are buying a piece of that company – you become its part owner. That ownership gives you certain rights, including voting on important matters of the company and participating in the profits.

High profit potential.

When you buy stocks, you become the owner to that extent and when the company makes more and more profits and expands, the demand for its shares will also rise. As a result, the share prices also move up. As an owner, you already have rights in its profits. Now, as the demand for the shares goes up, a second benefit in the form from of appreciation in capital invested opens up.

For example: Many of the early employees of Infosys are millionaires because their stock has gone up dramatically.

Risk

However what if the company dint make profits as expected? There won’t be much demand for it’s shares nor it will carry a high rate of profit share. Hence, along with the potential for extraordinary gain comes the potential for high loss. These two go hand in hand. If you are not careful in choosing a company, you can lose money by investing in stocks. Not only in stocks, in fact, have even the safest savings deposits carried unseen risks. When you account for inflation and taxes, you’ll find that most of the so called risk free investments are not so safe.

Source of Income

We have already explained that. Since share holders are part owners of the company, they are entitled to get a part of the annual profits of the company. Shareholders get income by way of dividends and bonus shares.

KNOW IT

  • Shares and stocks mean the same thing. Shares are collectively called stocks.
  • Shares give you right to ownership, voting, decision making and profits in a company.
  • Investment in shares can be risky if recklessly done.
  • Share investments have the potential to make you millionaires.
  • It gives you income in the form of dividends and bonuses.

You may like these posts:

  1. Lessons in computing returns – IV Returns from shares.
  2. Stocks-explained

9 Responses to “Basic charcteristics of shares”

Bonner

November 3, 2011 at 9:44 pm

You’re a real deep thinker.hanks for sharing.

prajwwal rai

March 10, 2012 at 8:51 am

Your site is amazing. I was always searching for such site which give overall basic information about share market and investments. Thank you for sharing..:)

prasanth madala

May 8, 2012 at 4:27 pm

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prasanth madala

May 8, 2012 at 4:28 pm

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Ashwani kumar

June 2, 2012 at 6:54 pm

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J Victor

June 3, 2012 at 7:35 pm

thanks ashwani :)

ABHISHEK

August 10, 2014 at 10:15 am

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Am going through each Article of your blog , it’s educating, inspiring and lucid. Thanks, for all the experience you have put in.

Rukhso

June 27, 2015 at 1:35 pm

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Nancy

August 14, 2016 at 10:32 pm

The way you explain nobody else can! Thankyou @Jvictor

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