A share, also known as a stock, is a unit of ownership in a company. When an individual or organization purchases shares of a company’s stock, they become a shareholder and own a portion of the company. Shares are bought and sold on stock exchanges, and their price fluctuates based on supply and demand, as well as the performance and financial health of the company.
There are two main types of shares:
Common shares: These are the most common type of shares and represent ownership in the company. Common shareholders have voting rights at company meetings and are entitled to a portion of the company’s profits in the form of dividends.
Preferred shares: These shares have priority over common shares in terms of receiving dividends and in the event of a company’s liquidation. Preferred shareholders do not typically have voting rights.
Owning shares can provide several benefits, including:
Potential for capital appreciation: If a company performs well, its stock price may increase, providing shareholders with capital gains if they sell their shares at a higher price than they bought them for.
Dividend income: Companies may distribute a portion of their profits to shareholders in the form of dividends.
Diversification: Investing in a variety of shares can help diversify an individual’s investment portfolio and reduce risk.
However, investing in shares also carries risk, as the value of shares can fluctuate based on market conditions and the performance of the company. Additionally, investing in individual stocks requires knowledge and research to make informed investment decisions.
Individuals can invest in shares through a brokerage account or through a mutual fund or exchange-traded fund (ETF) that holds a portfolio of shares.
