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Are Stocks and Shares the Same Thing?
Your 2-Minute dose of Genius!
Sika Republic
November 14, 2023
If you're dipping your toes into the world of investing, you’ve likely come across the terms "stocks" and "shares" and wondered - aren’t they the same thing? You’ll often hear the two words used interchangeably, but they do actually mean different things.
In today’s 2-Minute Masters we'll unravel the mystery and help you understand the subtle differences between the two.
Stocks equal the bigger picture
Stocks can be thought of as ownership certificates for companies. If you own stocks, it means you own a part of that company, and you become a shareholder. When people talk about "stocks," they're really talking about owning a piece of a company.
When a company decides to become a public company, it issues stocks to the public for the first time through something called an initial public offering (IPO). These stocks can then be bought and sold on stock exchanges, like the London Stock Exchange (LSE), the New York Stock Exchange (NYSE), or the Nasdaq. Each of these tradable parts is called a share.
Shares are like the building blocks of stocks. When you buy a share, you're essentially buying a small piece of that company. Picture it as being part of a team – you have a share, and together with all the other shareholders, you collectively own the company.
Even though the words "stocks" and "shares" are often used interchangeably, they have slightly different meanings. "Stocks" represent the big category that includes all the ownership certificates, while "shares" are the individual pieces that make up the whole stock. So, when you hear about stocks, remember it's like being part owner of a company, and each share is your piece of that ownership. Stocks are the big picture, and shares are the smaller pieces that bring that picture to life.
Today’s Takeaway:
While stocks and shares are closely related, "stocks" is the umbrella term that includes all shares available for trading in a company. People use the terms interchangeably, but it's helpful to start your journey understanding that there is a subtle difference.