What are Shares

Shares, also known as stocks or equities, represent ownership in a company. When you own a share, you essentially own a piece of the company. Shareholders can earn returns through dividends, which are portions of the company's profits distributed to shareholders, or through capital gains if the stock price increases.

Classifying shares can be a bit intricate. Shares can be categorized based on various criteria. One primary classification is based on the type of ownership rights they confer. For example, common shares give shareholders voting rights at shareholder meetings and the potential for dividends, but dividends are not guaranteed and can fluctuate. Preferred shares, on the other hand, typically do not provide voting rights but offer a fixed dividend, which has priority over common shares if the company distributes profits.

Shares aren't only distinguished by the rights they confer. They can also be categorized based on the size and market value of the company they represent. For instance, large-cap shares represent companies with a large market capitalization, often over $10 billion. These companies are usually well-established and stable, offering lower risk but potentially lower returns compared to smaller companies. In contrast, small-cap shares represent companies with a market capitalization between $300 million and $2 billion. These companies are often newer and have higher growth potential, but they also carry higher risk. Furthermore, shares can be grouped based on the industry or sector the company operates in. Tech shares, for instance, represent ownership in technology companies. These shares are often more volatile and can offer higher growth potential, reflecting the dynamic and innovative nature of the tech industry. Similarly, energy shares represent companies in the energy sector, including oil, gas, and renewable energy firms. These shares can be influenced by global energy prices and policies.