At Super-Advice we are about all things financial, but more importantly, helping people understand so they can get ahead financially.
In today’s blog post we will help you to easily understand what a share is.
To keep it simple
Without getting overly complicated, and the honest truth is it’s not that complicated. A share is a small piece of a company.
Private Vs Public
There are two types of company ownership broadly speaking, that is a privately owned company or a publicly owned company.
When we’re talking about what a share is we are dealing with public companies. All that means is the company invites the public to own little pieces of it or little shares.
One of the reasons companies choose to do that is to raise money. A way for a company to raise money, is to sell itself, and if it sells itself to the public, it can sell itself in lots of little pieces and a member of the public can choose to buy shares.
Do they have different names?
In New Zealand, we tend to call them shares.
In the United States you’ll hear them called stocks.
You’ll also hear shares called equities, but they all mean the same. The word equity is just derived from the word equal. Equity means equal piece so all the shares are the same size.
Why would a company want to make shares available to the public?If a company needs some money, they can generally choose to borrow money, they can raise money through debt by borrowing money, or they can raise money through selling ownership of their business.
The company can then take that money and use it for its operations, perhaps to grow or, or maybe to pay down some debt or a number of reasons.
Is it regulated?Yes. As soon as a company decides that they want to sell their shares to the public, they are now bound by a whole big long list of rules.
Just as an example, the company will have to report their results quarterly so that all of the public owners or shareholders can find out how their company is doing, which is important. Shareholders can make their decisions on what they would like to do going forward.
What is a share?All a share, stock or equity is, is just small pieces of companies.
To make them available to people they list their company and make it available on something like the New Zealand stock exchange. Then members of the public can either buy those shares through a share broker, or online trading platforms.
That’s a wrap
So what do you think? Have you got a better understanding of what a share is? Do you think you will grab yourself some?
If you need any financial help or advice please get in touch with us at Super-Advice.