Stock vs. Share: What's the Difference?

Stocks vs. shares

First let's look at stocks versus shares since these are the two terms that are most commonly confused, especially by newer investors. The main difference between a stock and a share is that stock is a broader concept to convey ownership in a company, while shares are the individual units of ownership.

What is a "stake?"

A stake is often used to describe the amount of stock an investor owns, and this is certainly a correct way to use the word. If you own stock in a given company, your stake represents the percentage of its stock that you own.

However, a stake doesn't necessarily need to refer to stock ownership. Rather, "stake" is a more general term used to convey partial ownership in a company. As an example, if you and a business partner decide to buy an investment property together, you could say that you both own a stake in the property even though there's no formal stock structure. In addition, bondholders are considered stakeholders in a company because they stand to benefit if the company performs well.

Additionally, if you invest in a smaller, non-public company, you might receive a stake in the business in exchange for your investment. Let's say a company is looking to raise $50,000 in exchange for a 20% stake in its business. Investing $50,000 in that company could entitle you to 20% of that business's profits going forward.

Stockholders, shareholders, and stakeholders

Those who own stocks in a public company may be referred to as stockholders, stakeholders, and shareholders, and. in reality, all three terms are correct.

Of these terms, stockholders and shareholders are essentially interchangeable in all situations. Both refer to investors who own shares of stock in a company. On the other hand, as you can probably infer from the previous section, stakeholder is a bit more general since it doesn't have to refer to stock ownership and simply means that the individual or entity has some form of financial interest in a business.