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?
Well, you could look at investing your extra savings in money-making market instruments to earn profits. Unfortunately, the market isn’t easy to understand, 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.
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 is share market and how does it differ with regards to the stock 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.
Let’s 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 standardised 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.
Companies list their equity shares on the stock market so that public investors can trade by buying and selling them after analysing the share market live updates. 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 a proof of their ownership of a share in a particular company.
So, 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 categorised as stocks owned by that investor.
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.
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.
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