What are shares? Definition & Meaning - nextmarkets Glossary

Last updated: 20.05.2020
Tim Parker
Author:
Tim Parker
Adviser
CFD & Trading
Experience
25 years

If you’re thinking about investing your hard-earned cash into stocks and shares, you may be wondering how the two terms differ. nextmarkets is your one-stop knowledge base for anything related to share dealing, and this guide answers your questions “What are shares?” and “What are the differences between stocks and shares?” in a simple manner.

You’ll discover that it’s really easy to start trading shares at nextmarkets and our demo account provides €10,000 dummy funding so you can practise buying and selling and benefit from all the daily advice and tips offered by our expert coaching team.

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So, exactly what are shares?

This guide aims to answer all your questions from ‘what are shares’ to how to get started trading. If you own one or more shares in a business that’s listed on a stock exchange, then you have part-ownership of the organisation. In the first instance, businesses offer shares in their company in order to raise funding for their ongoing activities and this is known as an IPO (Initial Public Offering).

Once investors have purchased shares via an IPO, the business is listed on its relevant stock exchange. You will see that all shares have a listed stock exchange price and this tends to fluctuate throughout any trading day. Owning shares offers shareholders a number of benefits, including annual dividend payments when any profits of the business are shared out and the chance to make money from selling shares if the company share price increases.

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What are shares in a company listed on a stock exchange

First of all, we will take a look at exactly what are shares in a company and how this differs for private companies and businesses listed on stock exchanges. Any legitimate business has shareholders who own a part or all of the company. So a private business may be owned and operated by two people, say, and it’s likely they would each own a 50% share of their company.

At the time their private business announces profits for the trading year, these two owners would probably be entitled to share this cash between them. When a business is listed on a stock exchange the price that will be charged for each share is calculated very carefully and an Initial Public Offering allows the business to raise money from all shares sold.

What is the difference between stocks and shares?

Many new traders often ask us what is the difference between stocks and shares. It’s actually fairly basic. You will appreciate now that shares in companies are issued on an individual basis and their price can vary on a daily basis.

Listed shares on stock exchanges are collectively known as stocks, or equities. So, if you owned a number of shares in a variety of companies, you might be more inclined to state that you own stocks, rather than shares. Sign up for a demo account with nextmarkets today to find out more about stocks and shares. We’re a high-tech online stockbroker, offering a variety of educational and coaching tips to our clients.

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Stocks and shares definition for beginners

Here’s a more clear-cut summary of the stocks and shares definition highlighted above. Basically, a share in a company listed on stock exchanges relates to part-ownership of the business. Companies can list as many shares in their business as they choose, just so long as their organisation has sufficient capital or turnover. It is also possible to issue more shares in a listed business, and this is discussed later on in the guide.

Stocks is the plural terminology for a number of shares. For example, you would own stocks, if you owned shares in companies such as Marks and Spencer plc, Shell Trading International and Unilever. You can learn all about how to buy shares when you sign up with nextmarkets.

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Investing in shares is a profitable way to benefit from the success of all the companies in which you own shares. Ways you can profit from shares include:

  • Increased values for all shares you own
  • Regular dividends income from companies in which you own shares
  • Rights issues which allow you to buy cheaper shares in a company in which you already hold shares
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What is a shares rights issue?

As previously highlighted, companies can issue more shares in their business by way of a shares rights issue. This means they can offer all their existing shareholders the right to buy more shares in their business at a price that is a lot cheaper than the currently listed share price.

Many companies pursue a rights issue when they are facing financial difficulties or want to fund additional expansion or perhaps acquire a new business. This is a common way of raising capital in a business. You can learn lots more about owning shares and rights issues when you open a stockbroker account with nextmarkets.

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How do I earn money from shares?

When you open a share trading account with nextmarkets you will learn more about the ways you can earn money from shares. For example, you will profit if your shares increase in value and you may also earn dividend payments each year if the companies in which you own shares make profits.

Also, if you do invest in discounted shares that are part of a rights issue, you could benefit immensely from the increased value of a higher number of shares. The coaches at nextmarkets can help you make tricky decisions on rights issues and share purchases, to maximise the potential value of all your investments.

Investing in shares definition

Investing in shares, or equities, in a company means making a payment for one or more shares at the price quoted on the relevant stock exchange, with a view to profiting when you sell shares or earning income from shares by way of regular dividend payments.

You can learn more about buying and selling shares by using our share trading app when you register for a demo account at nextmarkets. By definition, investing carries an inherent risk and by understanding the conditions a little better, such as when to buy and sell shares, the results may be more favourable.

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Getting to grips with shares meaning

The important thing you need to remember when considering investing in shares is that share prices can increase or fall, so buying shares can be risky if you don’t have good knowledge of the companies in which you buy them. That is why the coaches at nextmarkets are so valuable for new investors, and also, understanding when to buy individually or when to look at diversifying the portfolio. If you want to experience all the fun of investing shares, then signing up with nextmarkets offers a valuable education in stocks and shares for beginners. Sign up for our educational stock broker app today to find out more.

Why register for share trading with nextmarkets?

Whether you are a beginner trader or have vast experience at share trading, you will discover there are heaps of benefits to registering with nextmarkets. We offer a sophisticated trading platform which can be fully accessed from smartphones and mobile devices.

You will find it’s quick and easy to learn how to use our stock trading software and all your share buying and selling orders can be placed in real time to take advantage of the current stock market prices. Find out more about our trading demo account today and benefit from valuable coaching and share buying tips from professional traders every day as you learn the ropes.

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Stocks and shares difference explained

Finally, then, our coaches define the very real stocks and shares difference for any beginner interested in investing in shares as follows: Shares in a company are listed on their respective stock markets. Anybody can buy shares in a company and when they own shares in more than one listed business this is termed as owning stocks or being a stockholder.

Shares are also known as equities and you can find out more about share dealing and the answer to ‘what are shares’ when you browse our guides and video tutorials. This definition underscores the lengths our coaches are willing to go to in order to secure a well-informed trading session for our users.

Why to choose nextmarkets?

There are many reasons beginner share traders and experienced share dealers would want to register to buy and sell shares using share trading software like nextmarkets. We offer a sophisticated trading platform with all the tools needed to execute sales and purchases in just a couple of seconds.

What’s more, our expert coaches provide all our clients with dozens of curated investment ideas and in-depth business and financial analysis to help ensure profits from share trades are maximised. If you really want to learn more about trading at nextmarkets, sign up for our broker demo account today and benefit from £10,000 virtual funding so you can buy shares on global stock markets and experience the buzz of share dealing for yourself.

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Did you know?

Owning shares can be an exciting hobby or you can make a professional living from your profits. Learn how to trade shares with nextmarkets and benefit from:

  • A high-tech and sophisticated trading platform
  • Daily coaching tips from financial experts
  • Instant trading from mobile devices and laptops

How else are shares defined?

When you invest in shares in any company you may find these shares defined as equities or stocks. All these definitions are accurate and are used in various applications and by different users. Owning shares in a business means having partial ownership of the relevant company.

There may well be millions of shares issued for any specific business, and you could own just 100 of these. Even so, you are still classed as a shareholder and will benefit from any increase to the share price when you come to sell, and may also earn dividend income from your shares on an annual basis.

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A brief introduction to shares UK

Looking for a brief introduction to investing in shares in the UK? The UK stock exchange is called the London Stock Exchange which consists of a number of markets. Shares are traded on the FTSE-100 Index, the FTSE-250 Index and the FTSE-All Shares Index. You can also buy shares on AIM, which is the Alternative Investments Market. Buying UK shares is much cheaper and easier when you team up with an online stock broker like nextmarkets which sends you real-time updates and makes it easy to monitor the performance of your shares and specific companies, so why not try out our demo account to find out more?

Online shares trade meaning for new investors

There’s quite a bit of terminology to familiarise yourself with if you’re new to trading (find more in our guide Trading for Beginners). When it comes to defining what is meant by an online shares trade for beginners, we would advise you to read all of the sections in this comprehensive guide.

One online shares trade would be one buy or sell execution order that is placed with an online broker. At nextmarkets, we offer affordable share trade commissions with no hidden fees, so your costs for dealing shares are minimised to the fullest extent. Find out more when you sign up for a free demo account today.

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How is a shares trader defined?

If you want to find out how is a shares trader defined, then you are probably about ready to launch your own career in dealing with shares. A shares trader can be a person who deals shares as a sideline or can be a professional trader who makes a lucrative living out of trading shares on a regular basis. If you buy and sell shares with a trading platform like nextmarkets, then you will become a shares trader.

You may want to build your shares into a portfolio to hold onto for investment purposes and this can be profitable than saving through banks. Over the long term, shares have performed extremely well and made profits for shareholders. Alternatively, you may want to experience the buzz and highs of daily shares trading and attempt to profit from these sales. Our coaches at nextmarkets can help you achieve your goals and ambitions.

Reasons to trade shares

You probably already recognise that you want to trade shares on a regular basis. Some of the benefits of trading shares are:

  • you can create a valuable portfolio to hold for savings or pensions purposes
  • you can take advantage of regular dividends returns so you earn from your shares each year
  • you can experience the excitement and fun of dealing in shares
  • you can diversify your savings and make best use of your annual capital gains tax allowance

Find out more about trading with nextmarkets and benefit from our tuition and coaching as you learn all the tricks of professional share traders.

Why sign up for a nextmarkets account?

There are many good reasons to sign up for a nextmarkets share trading account. If you’ve always wanted to find out about global stock markets and learn how to invest in shares, our educational guides and video tutorials provide all you need. You also benefit from expert coaching and share buying ideas from professional traders who understand global markets and are prepared to share their tips and wisdom with new and existing investors.

And finally, the nextmarkets trading platform is simple and easy to use and offers everything needed for mobile share dealing in any location, at any time. Sign up for our demo account now and experience the fun and highs of trading shares on a regular basis.

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