Stocks,Shares and Debentures

- By Shruti.G

What are Stocks and Shares? What are Debentures?

Difference between Shares and Debentures.

Quick facts on stocks and shares. What is dividend? is a stock broker?

Who

What is a Stock Exchange? What are equity and preference shares?

Share/Stock:
A share or stock is a document
issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be

purchased from the stock market.

By owning a share you can earn a portion and selling shares you get capital gain. So, your return is the dividend plus the capital gain. However, you also run a risk of making a capital loss if you have sold the share at a price below your buying price.

Debentures:
Debenture is debt instrument because a corproate house or a public sector undertaking borrows money in the form of units which are given the name of debentures of a specific value. Debentures have a fixed term after which these are redeemable i.e. payable. sometime companies turn these debentures into their share after taking consent from debentureholders. While shareholders are part-owners of a company, debenture-holders are its lenders .

Differences between shares and debentures:

Shareholders are effectively owners; debentureholders are creditors. Shareholders may vote at AGMs and be elected as directors; debenture-holders may not vote at AGMs or be elected as directors. Shareholders receive profit in the form of dividends; debenture-holders receive a fixed rate of interest. If there is no profit, the shareholder does not receive a dividend; interest is paid to debenture-holders regardless of whether or not a profit has been made.

Quick Facts on Stocks and Shares:

Owning a stock or a share means you are a partial owner of the company, and you get voting rights in certain company issues . Over the long run, stocks have historically averaged about 10% annual returns However, stocks offer no guarantee of any returns and can lose value, even in the long run . Investments in stocks can generate returns through dividends.

Dividend:
Dividends are payments made by companies to their stockholders in order to share a portion of the profits from a particular quarter or year.

Stock Broker:
A stock broker is one who invests other peoples money until its all gone. A stockbroker is person who is licensed to trade in shares. Brokers also have direct access to the sharemarket and can act as your agent in share transactions. For this service they charge a fee called brokerage.

Stock Exchange:
A stock exchange, share market or bourse is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities

BSE and NSE :

The Bombay Stock Exchange Limited, or BSE has a nation-wide reach with a presence in 417 cities and towns of India. Its index, or market indicator is known as the Sensex. It gives a general idea regarding the movement of the stocks; whether they have gone up or have gone down The Nifty, is the leading index for large companies on the National Stock Exchange of India. It consists of 50 companies representing 24 sectors of the economy, and representing approximately 47% of the traded value of all stocks on the National Stock Exchange of India

Equity Shares:
An equity share is a unit of ownership in a company. Every company issues a certain number of shares to its promoters, i.e., those who participate in its formation. The company issues additional shares to the public, when it raises money by way of an Initial Public Offer (IPO). Hence, in addition to the promoters, the public too become shareholders of the company. So, if you hold 100 shares of a company which has issued 10,000 shares, you own 1 per cent of the company.

Preference shares:
Preference shares are shares that pay dividends at a specified rate and have a preference over ordinary shares in the payment of dividends and the liquidation of assets. They do not carry voting rights.

 Bulls make money. Bears make money. Pigs get slaughtered. Anon.