What Are Stock And Shares? Everything Beginners Need To Know

As a beginner to the stock market, you first need to understand what you are going to buy or sell—Stocks and shares–and what they represent for you and a listed company. Stocks and shares represent fractional ownership in a big or small company. When a company needs to raise money for different purposes– grow, debt payment,t or to give exit to investors, it divides its valuation into millions of small pieces and sells them to the public. Buying one of these pieces makes any eligible individual a part-owner of that business.

What Are Stocks and Shares in Simple Terms?

Stock: If you buy shares in a company, then you get general corporate capital or collective ownership certificates, and that is called stock. 

Shares: The individual, single units of ownership into which a company has divided its stock are known as shares. An individual buying a single or multiple shares becomes a partial shareholder in the organisation’s profit and loss.  

What Does Holding A Share Represent

If you buy shares in a particular company, it means you own equity, and it gives you a claim on a portion of the company's assets and earnings. Additionally, the ownership of many shares makes you eligible for voting rights on major corporate decisions and board member elections.

On the other hand, your financial liability–profit and loss- remains limited to only the amount of money you invested in purchasing the shares. 

How Investors Make Money

If you have invested in a company by buying its stock, then you earn generally through two primary methods–Capital Gains and Dividends.  

Earning money through capital gains means selling your shares for a higher price than what you paid at the time of buying. Whereas, earning through dividends means that companies that you have invested in distribute yield to their shareholders out of their corporate profits. 

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Where do you trade shares?

You need to first open a Demat account with any existing discount broker. Post that, you will have access to buy and sell shares through public networks called Stock Exchanges -Bombay Stock Exchange and the National Stock Exchange. 

Meanwhile, you need to keep in mind that share prices change every second based on market demand, company performance, and economic news, and it does ot guarantee a return. You could lose some or all of your invested money.