November 30, 2022
6 mins read
There’s a subtle difference between stock and shares that an investor must understand before starting their investment journey. While both in a way denote the same thing which is an individual’s ownership in a public company, still one must know the basic difference. A share represents the part ownership of a company whereas stock represents part ownership in either one or more organizations.
You must have heard the term stocks quite frequently. They are a form of financial securities that represents a part-ownership in a company. Stocks are a way to own a percentage or fraction of the company that provides certain rights to the stockholder. When you own a stock you get a certificate, proving your ownership. This certificate is stored digitally in your demat account. Investors own stocks so that they can sell them to gain profit once the company increases in value which helps its stock prices to increase in value as well.
A share represents a single unit of stock. It is the smallest denomination in which the ownership of the company is represented. We can understand this better with an example. If a company DEMO capital has issued a total number of 10000 stocks in the market, and you own a single share of the company then you own 0.01% of the company. As the price of each share increases, your investment value will increase as well.
| Point of Comparison | Stocks | Shares |
|---|---|---|
| Definition | Stocks represent part ownership of a company A stock is a financial instrument representing part ownership in single or multiple organizations. | A share is a single unit of stock. It’s a financial instrument representing the part ownership of a company. |
| Denomination | The value of two different stocks can be different | The value of each share of a company will be the same |
| Paid-up Value | Stocks are always fully paid-up | Shares may or may not be fully paid-up |
| Original Issue | Stocks are not a part of the original issue; shares are later converted to stocks | Shares are a part of the original issue |
| Types | Stocks are usually divided into two major types- common and preferred stocks. These categories can be further divided into growth, value, income, blue-chip etc., | Shares are categorized into common shares and preference shares. |
Stocks can be divided into further types. Let’s have a look at the most popular types of stocks, that are commonly used in the stock market.
Common Stock : Common stocks offer voting rights to investors; they can vote on important company decisions. They also offer the chance of dividend yields in some cases.
Preferred Stock : Although all companies issue common stock, preferred stocks are shared by some. Preferred stocks guarantee dividend payments to their stockholders. In a situation of the company getting liquidated, preferred stockholders would be compensated.
Large-cap stocks : These are stocks of companies that have a good stronghold in the market and contribute to a large share of the market capitalization. Usually, these are stocks of companies that have more than 20,000 crores of market cap. Large-cap stocks have been a safe investment option.
Mid-Cap Stocks : Mid-cap stocks have a market cap between 5,000 crores and 20,000 crores. They have a higher growth potential when compared to large-cap stocks. They are also more volatile in nature when compared to large-cap stocks.
Small-Cap Stocks : They are way more volatile than mid-cap stocks and have a market capitalization of less than Rs. 5,000 crores.
Growth Stocks : A growth stock is a stock that grows at a higher average than the market. These companies believe in reinvesting their profits and they dedicate a major chunk of their profits to reinvesting, paying fewer dividends in the process.
Blue-chip stocks : Blue-chip stocks are the elite among large-cap stocks, that have decades of a good reputation preceding them, with great dividend yields, and return on investments over the years.
Shares can be broadly categorized into two types: Equity or Common Shares and Preference Shares.
Equity or Common Shares : These are the most fundamental type of shares issued by companies. They are highly traded in the market and usually provide voting rights to investors. Equity shares can be further classified based on their definition, returns, and share capital.
Preference Shares : As the name suggests, these shares are preferred over any other share. Preference shareholders are also prioritized in the event of liquidation.
The benefits and risks of investing in the stock market are aplenty. Recent trends suggest that the benefits exceed the risks. Stock market investing has emerged as one of the most prominent ways of growing your wealth in recent times. The benefits of investing in the stock market include diversification, as you can diversify your wealth by investing in stocks , mutual funds, ETFs, government-offered bonds , non-convertible debentures, futures and options trading , etc.,
The primary risk associated with the stock market is volatility. Stock market is usually volatile in nature and if not handled carefully, can result in losses. It is also important to avoid any random stock tips and concentrate on expert advice only while investing or trading in the stock market.
People make money in stocks by buying and selling them. This is known as delivery trading where you buy stocks, hold them till their prices rise and then sell them to make a profit out of them. Apart from simple buying and selling, there are other ways people make money as well. Intraday trading is another popular form of making money by taking positions on stocks and selling them on the same day, to book profits. Traders identify patterns in the market and cash in on such scenarios with the help of leverage to make money. Derivative trading is also popular in the stock market where traders trade in futures and options markets.
As an investor, you can also make money by investing in mutual funds, index funds, bonds, and debentures.
Stock market investments are a great way to grow your capital and make the most of emerging businesses. The growth of investors in the stock market in recent times has fascinated one and all. However, just investing may not be the solution. Investing it right is the key to succeeding in the stock market. Some important points you should keep in mind before investing in the stock market are listed below:
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To open a Demat Account, below documents are required:
Demat Account can be used to hold various types of securities, like- shares, mutual funds, bonds, ETFs, etc.,
Yes, technically, it is possible to open a Demat Account without opening a Trading Account. However, most brokers today provide Demat & Trading Account.
Yes, the nomination facility is available in Demat Accounts. Every Depository Participant (DP) offers the option to add a nominee to the account. Nomination is mandatory as per recent SEBI guidelines.
Demat Account is not required for an SIP in mutual funds. However, if you want to initiate a stock specific SIP, which is a facility being provided by many stockbrokers today, you will need a Demat Account.
Yes, you can apply for IPOs using a Demat Account. In IPO application, one has to enter the Demat Account number to submit the application.
Yes, it is compulsory to have a Demat Account to apply for an IPO in India. While filling the IPO application, it is mandatory to enter the Demat Account number to submit the application.
Yes, you can open multiple demat accounts but only under the below conditions:
Open Demat & Trading Account online with us for below benefits-
One of the major reasons to have a Demat Account is to hold your investments electronically.Other than this, there’s also some aims and objectives for opening a Demat account.
Yes. In Demat and Trading Account, there is a ledger which holds the money transferred from bank account to the trading account. This money can be withdrawn by placing a withdraw fund request on the demat and trading application. Basis the broker, the fund transfer might take some time as it is subject to clearance from Risk Management team. In case you have some outstanding payments to make, you might not be allowed to withdraw fund until the outstanding is settled.
In the current scenario, most companies provide both Demat and Trading Accounts together. Technically, if a user has separate Demat and Trading Accounts, they can link them by completing the required formalities.
Yes, it is possible for an NRI to open a Demat Account in India. However, they need to have a Portfolio Investment Scheme approval from SEBI. The PIS helps NRIs to purchase and sell shares on the stock exchange in India.
The shares held in a demat account can be transferred to other demat account. The ownership of a Demat Account cannot change. A Demat Account holder can appoint a nominee to his/her demat account, who will be entitled to receive the assets held in demat account in case of a demise of the account holder.
Demat Accounts can be categorized into various types as below:
Demat Account can be opened for free. Some Depository Participants (DPs) might charge a nominal account opening fee. Along with it, some DPs might charge an Annual Maintenance Charge (AMC). With Bajaj Broking, one can open Demat & Trading Account free of cost through Freedom subscription pack.
Basis on whether you want to register as an individual or a corporate or in partnership with another individual, you can open below types of Demat Accounts:
A Demat account is the abbreviated form of dematerialized account. It is used to hold your shares and securities in an electronic form. It is mandatory to have a Demat account in India if you wish to trade and invest in the share market.
Yes, joint demat accounts can be opened with any Depository Participant. The account holders have to furnish the necessary KYC documents.
To open a Demat Account with Bajaj Broking, one must meet the below criteria:
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To open a Demat Account, below documents are required:
Demat Account can be used to hold various types of securities, like- shares, mutual funds, bonds, ETFs, etc.,
Yes, technically, it is possible to open a Demat Account without opening a Trading Account. However, most brokers today provide Demat & Trading Account.
Yes, the nomination facility is available in Demat Accounts. Every Depository Participant (DP) offers the option to add a nominee to the account. Nomination is mandatory as per recent SEBI guidelines.
Demat Account is not required for an SIP in mutual funds. However, if you want to initiate a stock specific SIP, which is a facility being provided by many stockbrokers today, you will need a Demat Account.
Yes, you can apply for IPOs using a Demat Account. In IPO application, one has to enter the Demat Account number to submit the application.
Yes, it is compulsory to have a Demat Account to apply for an IPO in India. While filling the IPO application, it is mandatory to enter the Demat Account number to submit the application.
Yes, you can open multiple demat accounts but only under the below conditions:
Open Demat & Trading Account online with us for below benefits-
One of the major reasons to have a Demat Account is to hold your investments electronically.Other than this, there’s also some aims and objectives for opening a Demat account.
Yes. In Demat and Trading Account, there is a ledger which holds the money transferred from bank account to the trading account. This money can be withdrawn by placing a withdraw fund request on the demat and trading application. Basis the broker, the fund transfer might take some time as it is subject to clearance from Risk Management team. In case you have some outstanding payments to make, you might not be allowed to withdraw fund until the outstanding is settled.
In the current scenario, most companies provide both Demat and Trading Accounts together. Technically, if a user has separate Demat and Trading Accounts, they can link them by completing the required formalities.
Yes, it is possible for an NRI to open a Demat Account in India. However, they need to have a Portfolio Investment Scheme approval from SEBI. The PIS helps NRIs to purchase and sell shares on the stock exchange in India.
The shares held in a demat account can be transferred to other demat account. The ownership of a Demat Account cannot change. A Demat Account holder can appoint a nominee to his/her demat account, who will be entitled to receive the assets held in demat account in case of a demise of the account holder.
Demat Accounts can be categorized into various types as below:
Demat Account can be opened for free. Some Depository Participants (DPs) might charge a nominal account opening fee. Along with it, some DPs might charge an Annual Maintenance Charge (AMC). With Bajaj Broking, one can open Demat & Trading Account free of cost through Freedom subscription pack.
Basis on whether you want to register as an individual or a corporate or in partnership with another individual, you can open below types of Demat Accounts:
A Demat account is the abbreviated form of dematerialized account. It is used to hold your shares and securities in an electronic form. It is mandatory to have a Demat account in India if you wish to trade and invest in the share market.
Yes, joint demat accounts can be opened with any Depository Participant. The account holders have to furnish the necessary KYC documents.
To open a Demat Account with Bajaj Broking, one must meet the below criteria:
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