Investors have the opportunity to participate in the trade of several different types of securities. Some of the most common types of securities available are known as stock and shares, or ownership of a corporation.
Stocks, or shares, are a type of registered security. When an investor purchases this type of security, they are buying a certain amount of ownership in a public company. This type of ownership means that they can hold a claim against both the earnings and the assets of the company they own shares in.
Owners of preferred stock cannot vote at meetings but are allowed to claim more money from the company’s earnings. On the list of priorities, preferred shared holders will receive dividends before other shareholders. They will also be the first to be paid out if the company collapses and its assets are liquidated.
Common stock entitles the investor to dividends on the shares owned and the right to vote on important company issues, like policy and the election of individual board of directors. In exchange for those rights, these holders give up preference for payouts and are at the end of the line when it comes time for payouts.
Both terms are typically used to describe the paper that demonstrates ownership of part of a certain company and for the most part, stocks and shares accurately describe the same process of ownership. In fact, equity also accurately describes the ownership process.
Using the different terms is more about accurate syntax than accurate meaning and the appropriate use of the terms is determined by the context. However, if you accidentally say one term when you mean the other, there will rarely be any confusion regarding what you mean.
These securities are awarded two ways. The first way is when they are awarded through a corporation as a part of a benefits package or through ownership of the company. The second, and most common way, is through purchasing them on the open market at the market price.
Shares cannot be purchased directly through the company itself. All trades must take place through a licensed broker or through a licensed online trading website.