Shares are units of equity ownership interest in a corporation that exist as a financial asset providing an equal distribution of any residual profits, if any are declared, in the form of dividends. Shareholders may also enjoy capital gains if the value of the company rises.
Shares represent equity stock in a firm, with the two main types of shares being common shares and preferred shares. As a result, “shares” and “stocks” are commonly used interchangeably.
For example, investors buy shares of companies that they believe will grow and hope to capture some of those capital gains as investors.
Stock market refers to the collection of markets and exchanges where stocks of publicly traded companies are bought and sold. Buying and selling stocks works like any other market where the parties negotiate a price to exchange an asset.
The institutions known as stock exchanges facilitate trading in listed stocks. In order to get listed on a stock exchange, companies often undergo an initial public offering (IPO). Once stocks have been made available to the public, individual and institutional investors can start trading.
If you think a company will experience strong growth, buy its stock. In order to make a profit, you must sell them at an increased price.
However, if you think a company is going to run into trouble that could affect its stock price, you would choose to sell your stock.
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