Shares and stocks are two terms used interchangeably by people who operate in the market. However, if you consider the nuances, there are a few differences between these two terms.
What is stock?
Stock is the total capital or ownership that a company creates in monetary terms. This stock is then sold to different investors in different proportions. A company can fix and revise this capital amount at any time during its operation. If an investor buys stock of a company, he becomes an owner of the company to the extent of stock purchased.
Stock also refers to the total capital amount taken together. When considered in terms of the stock market, stocks are considered as ownership in multiple companies taken together.
What is shares?
Shares are a portion of capital, which is split up into units that have the same value. Shares are either sold to investors or traded on the stock exchange. Shares refer to the capital of the company, but in terms of individual units having a specific paid up value. A share is a unit of ownership in one single company.
One difference between stock market and share market is that shares can refer to fully paid up shares or partly paid up shares whereas stock is always fully paid up capital.
What is the share market?
The share market in India consists of a market where equity shares are purchased and sold. Although in India, both equity and preference shares are issued, preference shares are usually not traded on the stock exchange. There are two types of share markets in India:
- Primary market:
A company that is looking at listing on the stock exchanges for the first time approaches the primary market. Different categories of investors, such as retail investors, institutions, high net worth individuals, foreign institutional investors etc. can apply to get equity shares of a company allotted.
- Secondary market:
Once a company has offered its shares in the primary market, these shares can be traded in the secondary market. To trade in shares, it is necessary to open a trading account with a reputed broker like Kotak Securities who can provide you the required support you need.
What is the stock market?
In the Indian context, the stock market refers to the broader market where it is possible to trade in not just shares but other types of instruments. Some of these instruments are
- Mutual funds
- Futures, Options, Swaps
The stock market presents an opportunity for investors to invest in different types of such instruments through different platforms. Investing in each such instrument requires an investment strategy. There are a lot of different resources online that are available for free. You can check out these resources on different websites such as Kotak Securities and plan your investment strategies accordingly.