What is a Share? Meaning, Types & How Shares Work in the Stock Market
The word "share" mainly means a piece of ownership in a company. When a company needs money to run its business or expand, it splits its total ownership into smaller parts called shares and sells them to people who want to invest.
Key Points About Shares
- Ownership: If you own a share, you are a part-owner of the company, also called a shareholder or stockholder. The more shares you own, the bigger your share of the company's assets and profits.
- Raising Money: Companies sell shares to the public (like through an IPO) or to private investors to get money without taking on debt.
Rights and Benefits:
- Dividends: Shareholders can get a part of the company's profits as dividends, but only if the board of directors decides to pay them.
- Voting Rights: Regular shareholders can vote on big decisions, such as who runs the company and major business changes.
- Capital Appreciation: The value of shares often goes up as the company grows, letting investors sell them for a profit.
- Limited Liability: If the company fails, your loss is only the amount you invested. Your personal assets are safe.
- Liquidity: Shares of companies listed on stock exchanges (like NSE or BSE) can be easily bought or sold during market hours.
Types of Shares
There are mainly two types of shares: equity (common) shares and preference (preferred) shares, and they have different features.
1.Equity (Common) Shares:
These show real ownership and usually give you a say in company decisions (one share, one vote).
Dividends depend on the company's performance and are not fixed.
They are riskier but can provide higher returns if the company does well.
2.Preference (Preferred) Shares:
These usually don't give you a vote.
They pay a fixed dividend, which comes before dividends to common shareholders.
In the case of a company shutting down, preferred shareholders get paid first, which makes them less risky than common shares
Example of a Shares
Dividends depend on the company's performance and are not fixed.
They are riskier but can provide higher returns if the company does well.
2.Preference (Preferred) Shares:
These usually don't give you a vote.
They pay a fixed dividend, which comes before dividends to common shareholders.
In the case of a company shutting down, preferred shareholders get paid first, which makes them less risky than common shares
What Does Owning a Share Mean?
Owning a share means:
You own a small portion of the company
You can earn profits if the share price increases
You may receive dividends (a share of company profits)
You benefit from the company’s growth over time
👉 If you are new, first understand:
Suppose a company has 1,000 shares.
If you buy 10 shares, you own 1% of that company.
Popular Indian company shares:
• Reliance Industries
• TCS
• Infosys
• HDFC Bank
How Share Trading Works?
Share trading involves:
Buying shares at a lower price
Selling shares at a higher price
Earning profit from price difference
Trading is done through:
✓Demat account
✓Online trading platforms
How to Buy and Sell Shares
To trade shares, you’ll need to:
- Open a Demat and Trading account with a licensed broker. The Demat account stores your shares digitally, while the trading account is used for placing orders.
- Add money to your account for investing.
- Study the companies you're interested in, looking at their financial reports, market trends, and future potential.
- Place a buy or sell order using your broker’s platform.
Benefits of Buying Shares
✔ Ownership in a company
✔ Opportunity for capital growth
✔ Dividend income
✔ Easy buying and selling
✔ Regulated by SEBI
Risks of Shares
⚠ Market price fluctuations
⚠ Company performance risk
⚠ Economic and global factors
Risk Reduction Tips:
Diversify your portfolio
Avoid emotional decisions
Invest after learning basics
Who Can Buy Shares in India?
Anyone who:
Is 18 years or older
Has a PAN card
Has a bank account
Opens a Demat & Trading account
👉 Read the complete list here: