Stocks Vs. Shares: What is the Difference?

4 mins read March 02, 2023

You are probably at that stage where you are considering the next step for your finances, and stocks seem like a great option. Or wait, is it shares? Stocks and shares are often used interchangeably, so you begin to wonder if there is a difference between them and if the distinction should influence your investment decision.

This is why this guide breaks down in easy-to-understand terms what stocks and shares are and how they differ to provide more clarity to guide your investment decisions.

What are stocks?

Stocks refer to an investment that gives you part ownership of one or more companies. You can earn dividends from stocks or sell the stocks for a profit. With ownership of stocks, you become a shareholder of that company. You can own stocks from multiple companies, such as Meta, Google, Amazon, Apple etc., and there is no limit to the stocks you can hold in your portfolio.

What are Shares?

Shares refer to the smallest unit or denomination of a company’s stocks. A company lists a certain number of shares. Once you buy company shares, regardless of the quantity, you own a percentage of the total shares and earn part ownership. With shares, you can earn interest on the money invested or sell them for profit when the value increases.

Stocks vs Shares: What is the difference?

Defining stocks and shares, you probably understand why they are so often used interchangeably, as their definition is similar. While they are so identical, here’s what differentiates them.

Definition: By definition, stocks represent part ownership in one or several companies, while shares refer to a single unit of ownership in one company. Get it? You can have stocks of more than one company, but when discussing shares, you refer to one company.
For example, Mark has stocks in Amazon, Nike, and Microsoft. However, Mark has only 10,000 shares on Amazon, 5,000 on Nike and 2,000 on Microsoft.
Mark wouldn’t say he has 17,000 shares in Amazon, Nike and Microsoft. As this connotes, he has 17,000 shares in each of these companies. Therefore, Mark would say he has a portfolio of Ssocks in Amazon, Nike and Microsoft, and 10,000 shares in Amazon. Therefore. Stocks refer to your entire portfolio, but shares are your assets within one company.

Ownership: An individual can own shares in several companies. In doing so, the individual owns stocks. However, if an individual only buys shares within one specific company, then the individual only owns shares of a company.

Denomination: Stocks can hold different values, depending on the company issuing them. As such, a person that holds stocks may have stocks of varying value, some more valuable than others. That is, the value of stocks in Paypal differs from that in Alphabet Inc.
However, for a person holding multiple shares within a company, the shares within the company have the same value. That is, the value of shares of Amazon is the same. Therefore, if a single unit of shares is worth $1 and James holds 10 shares, his shares are worth $10. If Mary also has 19 units of shares, then the value of Mary's shares is $19.

Paid-up value: An individual's stocks are always paid up in value. Paid-up value, also known as paid-up capital, is the money received from investors in exchange for shares of stocks.

When the shares are later sold or bought among investors, there is no added paid-up capital that is paid to the company. Instead, profits from the sale go to the shareholder selling the shares. However, shares may be either partly or fully paid up.

Key Takeaways

Therefore, stocks cover a wide range of companies, and shares are a measure of stocks. Therefore, you say I own stock in Amazon, or I own 50,000 shares in Amazon.

Your stake or ownership in a company is determined by how many shares you own. Therefore if Business A issues 300,000 shares of stock and Mark buys 5,0000 shares, Mark owns 1.6% of the company’s outstanding shares. However, Mark doesn’t own 1.6% of the company but the shares they listed for sale.

Final thoughts

The difference between stocks and shares often gets blurred because they refer to the same type of investment. Once you have completed relevant research, you can buy individual shares of companies and build a portfolio of stocks. However, diversify your portfolio and conduct research before buying or selling. This will help minimise losses because while stocks/shares investment is profitable, it isn’t without risks.

Disclaimer: This article is meant to provide general guidance and understanding of cryptocurrency and the Blockchain network. It’s not an exhaustive list and should not be taken as financial advice. Yellow Card Academy is not responsible for your investment decisions.