We all understand the importance of saving money for a rainy day. But, what do we do when we’ve saved up a sizeable chunk and now want to earn a little something extra along with our monthly salaries? People talk a lot about the Share Market and Stock Market but what exactly are these? And what is the Difference Between Share Market and Stock Market in the first place!
These are two separate entities obviously and in a few minutes of reading, you will know-how.
As far as understanding the context of Stock Market investments, well, you could look at investing your extra savings in money-making stock market instruments to earn profits.
Unfortunately, the point of understanding share market is not easy, and more often than not, we end up asking an expert to help us find a productive avenue for our savings.
No matter how you go about investing, you’re likely to put your money either in mutual funds, the stock market or in shares.
What is Share Market and Stock Market?
In the financial market of today, you will hardly be able to differentiate between a stock and a share, since both of these terms are used interchangeably to denote the same thing.
To know what the share market is and more importantly what is the Difference Between Stock Market and Share Market, it is important to know how both these terms are defined and in which context they’re used.
While the term ‘shares’ is used to refer to a particular company, ‘stock’ can be broadly used to refer to all shares owned across multiple companies.
People further get confused among the terms such as share market and stock market (and of course the stock market types too).
Let’s first try to understand what the role of a stock exchange is.
A stock exchange provides for an infrastructure where companies can list their equity securities, or stocks, for investors to trade.
Without it, there would not be a regulated environment and standardized mechanism to trade shares. And without a stock market, exchanges would not be of any use.
A stock exchange can be manual or electronic, and it provides telling information regarding the stock market’s size.
The Share Market, in general, is a space where companies come and raise funds for themselves via retail and institutional investors. The idea is to get money from the general public and put it into work towards the company’s future growth plans.
Companies list their equity shares on the stock market so that public investors can trade by buying and selling them after analyzing the share market live updates.
At the same time, when it comes to Stock Market, well it is an infrastructure where all kinds of entities including the regulator, exchanges, brokers, depositories, traders meet and perform their respective roles.
So generally, when traders say they are investing in a company, they refer to buying stock certificates, which are the physical documents that serve as proof of their ownership of a share in a particular company.
For instance, SEBI, as a regulator, makes sure that the investments done through stock market products are secure and are as per the norms and rules laid out. If there are any gaps, those need to be taken care of, either in the form of warnings, punishments or bans.
In the same sense, if an investor buys the shares of Company A, it would be incorrect to say, “I own Company A stocks”. Rather, the investor would say he or she owns the shares of ‘Company A’.
Alternately, if the investor has bought the shares of several companies, those would be categorized as stocks owned by that investor.
Stock Market Vs Share Market
While there is only a small difference between the Stock Market and Share Market, it’s important that we understand what each term stands for.
Even though the difference has more to do with the context of the usage of both terms and less to do with financial accuracy, it’s vital that we educate ourselves about the matter.
Here are some key differences:
Share is part owner-ship of one company (its a share) whereas a stock can be seen as a bundle of such ownerships.
There is mostly a nominal value associated with a particular share while there is nothing of that sort of compulsion when it comes to stock.
When you buy a particular stock of a company, you are called a Shareholder but not a stockholder. Of course, when you own multiple stocks of multiple companies, you obviously become a stockholder. Hope you get the fine line difference from there.
In general, when you would refer to the stock market and the share market, you would imply pretty much the same thing and using both the terms interchangeably is normal. The subtle difference comes in the technicalities and is rarely used in the practical sense.
At the end of the day, if we’re investing our hard-earned money, we need to be completely aware of the implications of what happens when we buy a particular stock or decide to purchase shares of a company.
And with this, we hope you understand the difference between stock market and share market.
In case you are looking to place your feet in the stock market, just fill in some basic details and we will get you started.