Difference Between Shares and Securities

Shares vs Securities
 

Difference between shares and securities is very important to know when it comes to investing. Individuals and corporate entities used to invest their money in various investment tools with the purpose of earning a yield or a return after a particular period. Securities and shares are two terms that have an increasing importance in the investors’ vocabulary. Securities are financial instruments that are exchanged among the investors in the forms of debt, equity or an agreement for a specific return value for the principal is decided. Shares are identified as a type of security that aims to raise funds for the corporations from the market. Return for the shares will be the amount of dividend paid off to the shareholders and the increasing market value of the investment.

What is a Security?

A security can be defined as a financial instrument with a defined negotiable financial value. Therefore, a security may be an ownership position in a publicly traded stock, a credit relationship that the investor has with a government or with a corporate entity or an agreement to perform a specific action in the future. Securities appear in different forms such as bonds, stocks, bank notes, futures, options, forwards, swaps, etc. Depending on the distinguished characteristics that each of these securities holds, they are categorized into different types such as debt securities and equity securities. The securities that are used for the purpose of obtaining credit such as bank notes, debentures, bonds are known as debt securities. The securities that are being transacted as a result of the investors’ interest towards the assets of firms are known as equity securities such as stocks and shares. Further, the derivatives including options, futures and forwards formulate an agreement between two parties to buy or sell assets in the future date at a pre-agreed price.

What is a Share?

A share is a financial asset that can be defined as a unit of ownership issued by a corporation for the purpose of obtaining fund from the market. This is a type of financial security that has some distinct characteristics. The value of the ownership is determined by the company and then it will be issued to the investor by a share certificate. Since the share is a unit of ownership interest, holder of shares receives the right to get dividends as a return. The corporations issue particularly two types of shares; known as common shares and preferred shares.

When a company issues its shares in the market, it has to adhere to the laws of the country at which the shares are being issued. Shares are exchanged via stock exchanges of the particular countries. Unlike the other securities, the market price of shares is determined by the demand and supply situation in the market.

A similarity between Securities and Shares is that both are types of investments that the investors can invest their money in.

What is the difference between Securities and Shares?

• Securities are identified as a financial instrument. Shares are identified as unit of ownership of a corporation.

• The value of security is determined by the issuer. Value of the share is determined by the demand and supply conditions in the market.

• The return for security is yield and for shares, the return is dividend.

• Securities include both debt and equity securities. Shares are one of the equity securities.

Summary:

Securities vs Shares

Security is a general term that is used to represent any form of financial investment. Investors invest in securities to get a pre-determined or agreed return in the forms of interest, increased value of the investment asset. Securities are basically in three forms; debt securities, equity securities and contracts. Moreover, shares are a type of equity security that comprises the ownership certificate of a corporation. The return of a share investment is the dividend paid by the corporation plus the increase in the market value of the shares.