Are you confused between the terms “Stocks” and “Shares” and you don’t know which one to use, stocks or shares, and when? Then don’t sweat over it. You are committing no crime. Generally speaking, there is not much of a difference between the two terms and both can be used interchangeably. Stocks and shares mean the same. Both represent ownership stack in an entity. If you use any of the two words, you won’t be wrong.
Moreover, the use of any of the terms depends upon the context. If an investor is talking about having stakes in multiple companies then the use of term ‘Stock’ is preferable and if talking about having a stake in a particular company then the word ‘Shares’ is preferable.
However, if we speak technically and go as per Indian Companies Act 2018, then there are few differences between the two terms. Let us see those differences from our knowledge point of view.
- If you have read our earlier blogs then you would know that a ‘Share’ is the smallest unit into which the company’s capital is divided and representing the ownership in the company.
On the other hand, ‘Stock’ is the collection of shares of a member that are fully paid up.
- Share is always issued whereas the issue of Stock is not possible.
- Share is either partially or fully paid but Stock is always fully paid as fully paid shares are transformed into Stocks.
- As shares represent capital divided into small units that’s why they cannot be transferred in fraction whereas Stocks are a combination of shares, therefore, they can be transferred in fraction.
- Shares have nominal value, but the stocks do not have any nominal value.
When shares are transformed into stocks then the shareholder becomes the stockholder and possess the same right with respect to the dividend as the shareholder.
Here is the difference for you. This should clear all your confusions and doubts about the two terms. The terms are used liberally by all the big investment advisors and consultants as both the terms almost mean the same. So go ahead whichever the word you want to use.