What is a stock? Basic understanding for investors

The Difference Between Stock and Shares

The terms Stock (Stock) and Shares (Shares) are often used interchangeably, but they have slightly different meanings.

Stock is a general term used to describe ownership rights in multiple publicly traded companies. In contrast, Shares specifically refer to units of ownership in a single company. Additionally, it can also refer to other investment vehicles such as mutual funds or ETFs.

When a company issues stock to the market, investors can purchase a portion of ownership in the company. Shareholders have the right to receive a share of the company’s profits and assets, including dividends, and have a say in decision-making. Moreover, if the stock price increases, investors can sell for a profit.

What Types of Stocks Are There?

Stocks are mainly divided into two main categories:

Common Stock (

This type of stock represents ownership rights in a company and grants voting rights to shareholders for important company decisions. Common shareholders may receive dividends, but the amount can vary depending on the company’s performance.

) Preferred Stock ###
This type grants special privileges to shareholders, such as fixed dividends paid before common shareholders, and generally carries lower risk. However, preferred shareholders typically do not have voting rights in company decisions.

Additionally, stocks can be classified as:

Growth Stock (Growth Stock) – Stocks of companies expected to expand faster than the average market rate. Investors look for opportunities to grow their business and compete vigorously in the coming years.

Value Stock (Value Stock) – Stocks of companies that are in a mature growth phase and are undervalued relative to their true worth. They are characterized by stable profits, continuous dividends, and lower risk.

Why Do Companies Decide to Issue Stocks?

Companies seeking additional capital may choose to issue stocks to raise funds for:

• Paying off existing debts
• Developing and launching new products
• Entering new markets or regions
• Building and expanding manufacturing facilities

Why Do Investors Buy Stocks?

Investors are motivated by several reasons to purchase stocks:

Capital Appreciation – When stock prices rise, the value of the investment increases. Investors can sell at higher prices and realize profits.

Dividends – Some companies distribute a portion of their profits to shareholders as dividends, providing additional income.

Voting Rights in the Company – Common shareholders have voting rights to influence major company decisions and impact the company’s direction.

Overall, understanding stocks and their types helps investors choose investment strategies aligned with their financial goals.