INVESTING

Shares, stocks, securities

The above terms are often used interchangeably. Nevertheless, there are subtle differences that we will review below.

Shares

• Shares refer to units of ownership in a company.
• When you buy shares, you own a portion of that company equal to the number of shares you purchased ie you become a shareholder.
• The more shares you own, the greater your ownership stake in the company.

Stocks

• Stocks, also known as equities, are securities that represent ownership in a corporation.
• When an individual buys stocks, they become a shareholder and are entitled to a portion of the company’s profits and assets, as well as the right to vote on certain company decisions.
• Stocks can be bought and sold on stock exchanges, such as the NYSE and NASDAQ.

Securities

• Securities refer to financial instruments that have monetary value and can be traded.
• Securities include stocks, bonds, options, and derivatives.
• Securities represent a right to ownership in an asset or a claim to future earnings.

In summary, all stocks are securities, but not all securities are stocks.