Definition of a Share

A share is a unit of ownership in a company or financial asset, representing a portion of the entity’s capital. When an investor buys shares of a company, they become a shareholder and may receive dividends or voting rights, depending on the type of share they own.

For example, a Canadian investor purchasing shares of Shopify Inc. owns a portion of the company and may benefit from stock price appreciation or dividends.

Purpose of Shares in Finance and Investing

Shares play a crucial role in:

• Company Financing – Businesses raise capital by issuing shares to investors.
• Wealth Creation – Investors buy shares to build long-term financial growth.
• Dividend Income – Some shares provide regular payments to shareholders.
• Voting Rights – Certain shares allow investors to participate in corporate decisions.
• Market Liquidity – Shares can be bought and sold easily on stock exchanges.

Types of Shares

Common Shares

• Represent ownership in a company and typically come with voting rights.
• Example: A shareholder of Royal Bank of Canada (RBC) common stock can vote on corporate decisions.

Preferred Shares

• Offer fixed dividends but usually do not include voting rights.
• Example: A preferred share in a Canadian bank provides consistent income but no control over corporate governance.

Voting vs. Non-Voting Shares

• Voting shares allow shareholders to influence corporate decisions.
• Non-voting shares provide ownership benefits without voting rights.
• Example: Some companies issue Class A (voting) and Class B (non-voting) shares.

Treasury Shares

• Shares that a company has repurchased and holds in its treasury.
• Example: A corporation buys back shares to reduce the number of outstanding shares in the market.

Growth vs. Dividend Shares

• Growth shares focus on capital appreciation rather than dividends.
• Dividend shares provide regular income through dividend payments.
• Example: Tech stocks are often growth-oriented, while utility stocks provide stable dividends.

How Shares Are Traded

Stock Exchanges

• Shares are bought and sold on exchanges such as the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).
• Example: A Canadian investor purchases shares of Telus Corp. through the TSX.

Over-the-Counter (OTC) Markets

• Some shares, especially small-cap or private company shares, trade outside of major exchanges.
• Example: A startup company’s shares may be available only through private transactions.

Initial Public Offerings (IPOs)

• When a company first issues shares to the public, it launches an IPO.
• Example: A Canadian tech startup goes public by listing shares on the TSX.

Share vs. Stock

Feature	Share	Stock
Definition	A unit of ownership in a company	A general term for ownership in a company
Quantity	A company can have many shares	"Stock" refers to ownership in a company as a whole
Example	"I own 100 shares of TD Bank."	"I own stock in TD Bank."

Example: Investors broadly use the term "stock" when referring to ownership but specify "shares" when discussing the number of units owned.

Advantages and Disadvantages of Shares

Advantages

• Capital Appreciation – Share prices may increase, leading to financial gains.
• Dividend Payments – Some shares provide passive income.
• Liquidity – Shares can be easily bought or sold on stock exchanges.

Disadvantages

• Market Volatility – Share prices can fluctuate significantly.
• Dividend Uncertainty – Not all companies pay dividends.
• Risk of Loss – Investors may lose money if a company's stock declines.

Related Terms

• Stock market – A marketplace where shares are traded.
• Dividend yield – The percentage return a company pays shareholders in dividends.
• Market capitalization – The total value of a company's outstanding shares.

Interesting Fact

In Canada, over 12 million investors hold shares through direct stock ownership, ETFs, and mutual funds, making equities a key component of personal wealth and retirement savings.

Statistic

According to Statistics Canada, over 40 percent of Canadian households own shares or stocks, either directly or through retirement accounts like RRSPs and TFSAs.

Frequently Asked Questions (FAQ)

1. What is the difference between a share and a stock?

A share refers to a single unit of ownership, while stock is a broader term for company ownership.

2. How do I buy shares in Canada?

Investors can buy shares through brokerage accounts, stock exchanges, and investment apps.

3. Do all shares pay dividends?

No, only dividend-paying stocks provide regular income, while growth stocks reinvest earnings.

4. Can I sell my shares anytime?

Yes, most shares can be bought and sold on the stock market during trading hours.

5. What happens if a company goes bankrupt?

Shareholders may lose their investment, as stockholders are the last to be repaid in a bankruptcy.