Stocks and Shares (: Differences and Roles in Investment

Why Do Investors Need to Understand Stocks?

Those interested in entering the capital markets need to understand why people buy stocks. The main motivations for investors include:

• Capital Appreciation: When stock prices rise, shareholders can sell to realize profits
• Dividend Income: Profitable companies often distribute a portion of their earnings to shareholders
• Voting Rights and Influence: Large shareholders have the right to participate in decision-making processes of the organization

Stock and Share: Are They the Same or Different?

The terms “Stock” and “Share” are often used interchangeably, but they have different meanings:

Stock is a general term referring to ownership in one or multiple companies. When a company issues stock, it means it is selling a portion of ownership to investors. These individuals become shareholders and are entitled to a share of profits and assets.

Share has a more specific meaning, referring to a unit of ownership in a company or investment fund, which may include stocks, mutual funds, or ETFs.

Overall, both Stock and Share represent ownership interests in a company, but their usage scope may differ.

Why Do Companies Decide to Issue Stocks?

When a company issues stock, it is usually to raise funds for:

• Paying off existing debts
• Developing new products
• Expanding into new markets or regions
• Building or upgrading facilities

In other words, issuing stock is a way for companies to raise capital without borrowing from financial institutions.

How Many Types of Stocks Are There?

Common Stock (

This type of stock represents ownership in a company and grants voting rights on important corporate decisions. Common shareholders may receive dividends, but the amount depends on the company’s performance.

) Preferred Stock ###

This type of stock emphasizes dividend payments and rights over common stock. Preferred shareholders usually receive fixed, stable, and secure dividends.

Classification of Stocks Based on Growth Characteristics

Besides the type-based classification, stocks are also categorized according to growth potential:

Growth Stocks (Growth Stock)

Stocks of companies expected to grow faster than the market average. Investors see these companies as having high potential to increase market share, enhance competitiveness, and generate higher profits in the coming years. This makes growth stocks desirable, but they tend to be more volatile.

Value Stocks (Value Stock)

Stocks of well-established, stable companies characterized by consistent profitability, undervalued prices, high safety, and steady dividends. Value stocks generally carry lower risk and volatility compared to growth stocks, making them suitable for investors seeking stability.