People often use the words “shares” and “stocks” interchangeably. But they’re a little different.
Let’s break it down.
Stocks vs. shares
A public company issues stock, which it offers for sale on an exchange. As an investor, you can buy and sell shares of that stock.
Think of shares as the individual units of a company’s stock. So when you purchase a company’s stock, you’re actually buying some of its shares.
Shares are assigned a monetary value (in the U.S., shares are in dollars), and that value fluctuates throughout the course of the day. That means the value of your shares will move up and down, depending on what’s happening with the company.
What are fractional shares?
A fractional share, as its name implies, is a fraction of a share, or less than a whole share of a company’s stock. And some trading platforms, including Stash, let you buy fractional shares.
Why would someone want to invest in fractional shares, instead of buying a whole share? The price of even a single share of stock for some companies can be hundreds, or even thousands of dollars.
Purchasing fractional shares can help you start investing with just a little bit of money, rather than paying the full price for whole shares.
Preferred vs. common shares
Shares can be either preferred or common. Common stock is what most people buy.
Preferred stock typically carries a specified dividend, and in situations such as bankruptcy has some priority over common stock. In cases where the company stock is increasing, the value of preferred stock will not increase as much as the value of common stock.
When you own common shares of a company’s stock, that also gives you some voting rights.
You can vote on the selection of board members, on whether a stock splits, as well as on mergers and acquisitions, among other things. Preferred shares usually have no voting rights.
Good to know: You need to own a whole share of a company’s stock to have voting rights. So if you own a less than a full share—for example a fractional share—you won’t have voting rights.
In the old days, companies issued paper certificates to indicate the number of shares you owned. Today, stock ownership in the U.S. is pretty much all digital.
An entity called the Depository Trust & Clearing Corporation (DTCC) serves as a central clearing house for the trading and settlement of stock.
Keep on Stashing
Investing isn’t as complicated as it sounds. Once you learn some basic terms, you can start on your journey with confidence.