Difference between stock market and share market

Generally, people enter the financial market for extra income. However, they may lack knowledge of appropriate market terminology. It is difficult for a newbie to understand terms such as ‘share,’ ‘stock,’ and ‘equity,’ and not having a clear understanding can be problematic. An investor should be familiar with these terms well before they start investing. Being aware of the jargon helps you invest wisely. In this article, we will discuss the difference between stock and share markets. A new investor may not always know the difference between the stock and share markets. So, let’s start by breaking the terms into parts and seeing their meanings.

Meaning of share market

The term ‘share’ is associated with investment options like mutual funds and limited partnerships. But both markets are based on the same thing—trading.

• Shares are units of the total valuation of a company. For instance, if you invest in a company, you will receive a certain number of shares, depending on the money you invest.
• The share market is a market where a company offers its shares to raise funds and continue the growth of its business. It is a place where an investor can buy part ownership in any company.
• It is a platform to buy and sell shares.
• In general, shares refer to stock ownership of a particular company.
• When you buy the shares of a company, you become a ‘shareholder’ of that company. For example, when someone claims to own shares in a company, it means they have invested in a specific firm and are a shareholder of such a firm.
• An investor also enjoys a part of profits earned by the company through dividends.
• If the business does not perform well, the investor also needs to bear the loss.

Meaning of stock market

The stock market, also known as the stock exchange, is a place where stocks, equities, and other securities and bonds are actively traded.

• The term ‘stock’ is used to signify the ownership certificate of any company.
• A stock market provides the infrastructure to trade in a secure and controlled manner. The stock market brings the stock seller and buyer together.
• The Securities and Exchange Board of India (SEBI) regulates the stock exchanges in India. Hence, fair pricing and transparency of transactions are assured.
• A stock cannot be bought or sold if it is not listed on a stock exchange. In the stock market, stockbrokers trade companies’ stocks, securities, and bonds.
• India’s two principal stock exchanges are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
• The market tracks the demand and supply of stocks and sets its price accordingly.

Overview

Even though these terms are used interchangeably, they differ in their modes of operation. A share or stock market is essentially a market where various kinds of bonds and securities are traded. The price of a company’s stock depends on the demand and the supply of that stock. A company can issue shares directly, but it cannot issue stocks in such a manner. When a number of shares are put together, it is called stocks. Also, keep in mind that shares can have a small value, while stocks will always have a significant amount of value. These are the major differences between the stock market and the share market.

Now that you know how the stock market is similar to and different from the share market, trading is even easier. Open a demat account and start trading.

Read more: How to trade in the stock market