Stock Market Guide

Confused by the words used in the news or at dinner or on the street about the financial world? Its EASY!

What is a SHARE and who is a SHAREHOLDER?

A "share" is exactly what it says it is. It is a piece of paper that shows you own a part of a company. It may be 1%, more or less than that.

Imagine a company is like a cake, divided into many slices. Each slice represents a "share". The difference here is that everyone who owns one or more of these shares in a company is considered a part owner of the company. These people are known as shareholders, in other words, people who hold shares.

As a shareholder, you do not take an active role in running the company, you are purely a part owner and you benefit from the profits of the company.

Other names commonly used for share and shareholder are: share of stock, a share certificate, stockholder, investor.

What is an INVESTOR?

An Investor is anyone like you or me who decides to buy a share in a company. Immediately he is considered a shareholder since he owns a share, but he is also known as an investor; in other words, somebody who has invested money in a "share".

What is the STOCK EXCHANGE?

You should be asking yourself; where can somebody get one of these shares ? The answer is the stock exchange.

The stock exchange is a place where people buy and sell shares of companies. It might seem chaotic and undisciplined from the films you have seen. However, it is a very complex system which allows people who want to buy shares to meet (in person or via the computer) people who want to sell shares. It is this exchange between the people who buy and those who sell that determines the price of a share.

There are stock markets in major cities across the world; e.g. London, New York, Tokyo, Hong Kong, Paris. In London you will hear about the LSE, which is the London Stock Exchange.

Other names commonly used for the stock exchange are: the stock market, the market, the Footsie (FTSE).

By Alan Benaim (Investment banker)

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