When you start investing, you’ll often hear terms like shares and stocks being used. It’s easy to get confused, but once you understand the basics, it becomes much simpler. Let’s break down what shares and stocks are, how they work, and how you can start investing even with a small amount of money.
Table of Contents
What is a Share?
A share is the smallest unit of ownership in a company. When you buy a share, you are buying a piece of that company. The more shares you own, the greater your ownership stake in the company.
For example, if a company has issued 1,000 shares and you own 10 of them, you own 1% of the company. Owning shares can entitle you to a portion of the company’s profits, usually paid out as dividends.
What are shares in stocks?
What is a Stock?
Stock is a broader term that refers to ownership in a company. When you own a stock, you own shares of a company. Essentially, shares are the units of stock. Think of stock as the general term and shares as the specific units of that stock.
Difference Between Shares and Stock
- Specificity: “Shares” refer to the units of ownership in a specific company, while “stock” or “stocks” is a general term that signifies ownership in one or more companies.
- Usage: You might say, “I own shares in Reliance Industries,” but “I have invested in the stock of Reliance” to mean you have investment in Reliance Industries.
How Do Shares Work?
When a company wants to raise money, it can issue shares to the public through an Initial Public Offering (IPO). Investors can then buy these shares on the stock market. The price of shares can go up or down based on the company’s performance and other market factors.
How can we invest in the Indian Stock Market?
In India, the stock market is primarily represented by two major exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Here’s how you can start investing:
- Open a Demat Account: This account holds your shares in electronic form.
- Choose a Broker: You need a broker to buy and sell shares on your behalf.
- Research: Look into companies you are interested in. Understand their business model, financial health, and market position.
- Start Small: You don’t need a lot of money to start. Even with as little as ₹10,000, you can begin your investment journey by buying shares of good companies.
Example of Shares in the Indian Stock Market
Let’s say you buy 10 shares of a company like Tata Motors at ₹800 each. If the price of Tata Motors shares rises to ₹850, you can sell your 10 shares for ₹8,500, making a profit of ₹500.
Can You Buy Just One Share?
Yes, you can buy just one share of a stock. The number of shares you buy depends on how much money you want to invest and the price of the shares.
How Do Shares Make Money?
- Capital Gains: If you sell your shares for more than you paid for them, the profit is called a capital gain.
- Dividends: Some companies pay a portion of their profits to shareholders in the form of dividends.
Can I Invest ₹10 in the Share Market?
Yes, you can start investing with as little as ₹10. Some companies have shares priced under ₹10, allowing you to start small. However, it’s essential to research and understand the risks involved, as lower-priced stocks can be more volatile.
Conclusion
In conclusion, understanding shares and stocks is fundamental to trading and investing. Start small, do your research, and gradually increase your investments as you become more comfortable with the market. Happy investing!
How many shares are there in 1 Stock ?
One stock can comprise multiple shares.
What is 100 shares of a stock called?
This is often referred to as a “round lot.” In the past, buying in round lots was common, but today you can buy any number of shares.