A share is a small piece of ownership in a company. If a company has issued 10 crore shares and you own 100, you own one millionth of it.
Why companies issue shares
Companies raise money by selling shares, first in an IPO (initial public offering) and sometimes later. The money pays for factories, products or paying off loans. In return, shareholders own part of the business.
What a shareholder gets
- A share in profits, when the company pays a dividend.
- A change in value: the share price can rise or fall as the business and market mood change.
- A vote on some company decisions at general meetings.
Shares are not fixed deposits
Nothing guarantees a return. A share can fall a long way, and a company can fail. That is why it helps to understand the business behind a share before buying it.