What Are Shares? What Are Their Types? (Equity & Preference Shares Explained)

🔰 What Are Shares? (What Are Shares in Simple Words)

In simple words, shares are units of ownership in a company. When a company wants to raise money, it offers a part of its ownership in the form of shares. The buyers of these shares are known as shareholders.

So, what are shares of a company? They represent a portion of the ownership in that company.

Example: If a company has 1,00,000 shares and you buy 10,000 shares, you own 10% of that company.

📈 What Are Shares in the Stock Market?

When shares are bought and sold publicly through platforms like NSE or BSE, it becomes part of the stock market. The stock market is where companies list their shares, and investors trade them to earn profits.

So, when we say what are shares in stock market, we mean: “Shares that are listed and traded on a public exchange.”

🔍 What Are the Main Types of Shares?

Shares are mainly classified into:

1️⃣ Equity Shares (Common Shares)

2️⃣ Preference Shares

✅ 1. Equity Shares (Common Shares)

Equity shares are the most common type of shares issued by companies. When you hear people say they own shares, they usually mean equity shares.

📌 Key Features:

🟢 Ownership in the company
🟢 Voting rights in company decisions
🟢 Dividends not fixed (depends on profits)
🟢 Risk is high, but so is the reward
🟢 Share prices fluctuate based on demand

✅ 2. Preference Shares

Preference shares give fixed dividends and have priority over equity shares when it comes to receiving profits or in case of liquidation.

If you’re wondering what are shares and bonds, here’s the difference: Shares are ownership, while bonds are debt instruments. Preference shares lie somewhere in between, as they offer fixed returns like bonds but still represent ownership.

🧩 Types of Preference Shares

✅ Cumulative Preference Shares
✅ Non-Cumulative Preference Shares
✅ Redeemable Preference Shares
✅ Convertible Preference Shares
✅ Participating Preference Shares

🆚 Equity vs Preference Shares

Feature	Equity Shares	Preference Shares
Dividend	Not fixed	Fixed
Voting Rights	Yes	Rarely
Ownership Rights	Full	Limited
Risk	High	Lower
Priority	After preference	Before equity

📘 What Are Shares and Stocks?

In many places, the terms shares and stocks are used interchangeably. However:

Shares usually refer to the specific units of ownership in a particular company.
Stocks is a general term referring to ownership in one or more companies.

So, if you’re asking what are shares and stocks, just remember: Stocks = Collection, Shares = Units.

📙 What Are Shares and Debentures?

Shares represent ownership in a company.
Debentures represent a loan given to the company, usually with interest but no ownership or voting rights.

For example, if you own debentures of a company, you’re its creditor; if you own shares, you’re a part-owner.

📊 What Are Shares Outstanding?

Shares outstanding are the total number of shares currently held by shareholders, including company insiders, institutions, and the public. It affects earnings per share (EPS), market cap, and more.

💡 Why Do People Invest in Shares?

✅ Earn dividends
✅ Capital gains
✅ Participate in company growth
✅ Trade and earn short-term profits
✅ Long-term wealth creation

📘 Things to Consider Before Buying Shares

📊 Analyze company financials
📉 Check stock price trends
⏳ Determine your investment goal
📌 Understand risk factors
🧠 Compare share performance with bonds and debentures

🔐 Are Shares Safe to Invest In?

While shares offer higher returns, they also carry higher risk. Diversifying across stocks, bonds, and mutual funds can help manage this.

📣 Conclusion:

Now that you understand what are shares in simple words, it’s easier to see how they fit into the financial world. Whether you’re investing in equity shares for growth or preference shares for fixed income, both come with unique advantages.

Remember, if you’re comparing what are shares and bonds, or what are shares and debentures, the key difference is ownership vs. lending. Shares give you ownership; debentures and bonds make you a lender.

🔗 Explore our link for more details

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🔗 For detailed information, please visit this page

👉 NSE India – National Stock Exchange
👉 BSE India – Bombay Stock Exchange

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What Are Shares? What Are Their Types? (Equity & Preference Shares Explained)