What Are Shares? A Beginner’s Guide to Online Trading
If you’re stepping into the world of online trading, one of the first concepts you need to grasp is shares. In simple terms, a share represents a unit of ownership in a company. When you purchase shares through an online trading platform, you’re essentially buying a small stake in that company. As the business grows or profits, your investment may rise in value—offering you returns through capital gains or dividends.
Imagine a company as a pizza. Each slice of that pizza is a share. When you hold one slice, you own a part of that business—along with the rewards or risks that come with it.
Today, online trading platforms have made it easier than ever to buy and sell shares from the comfort of your home. With just a few clicks, you can own shares of top companies listed on Indian or global stock exchanges.
???? Why People Buy Shares
There are three main reasons why people invest in shares:
Capital Appreciation – Buying low and selling high to make a profit.
Dividends – Earning a share of the company’s profit, usually paid out quarterly or annually.
Ownership Rights – Voting on important company matters (applies mostly to equity shareholders).
Two Main Categories of Shares
Let’s dive into the types of shares. Broadly, shares are divided into two categories:
1. Equity Shares (Ordinary Shares)
These are the most common type. When someone says they own shares of a company, they’re usually talking about equity shares.
Ownership: You get voting rights and partial ownership.
Dividends: You may receive a portion of profits, but it’s not guaranteed.
Risk: High. If the company shuts down, equity shareholders are paid last—after everyone else (creditors, lenders, etc.).
Equity shares are ideal for long-term investors who want to grow wealth over time and can handle market ups and downs.
2. Preference Shares
These are less common and come with a few special perks:
Fixed Dividend: Preference shareholders get a fixed dividend, no matter how the company is doing.
Priority in Payment: In case the company is dissolved, they get paid before equity shareholders.
No Voting Rights: In most cases, you can’t vote on company matters.
These are perfect for conservative investors looking for regular income and lower risk.