Shares vs Stakes: What You Need to Know as an Investor

When we begin our journey in the financial markets, it is crucial to understand the different investment tools available. Although many people use the terms “stocks” and “shares” interchangeably, the reality is that they are quite different instruments with completely different characteristics and rights. This guide will help you precisely identify what you are acquiring and what rights you have as an owner.

What is the nature of stocks?

Stocks represent fractions of a company’s share capital. When you acquire a stock, you become an owner of that company in the corresponding proportion. Companies incorporated as Public Limited Companies are the only ones authorized to issue stocks.

As a shareholder, you enjoy certain significant privileges:

• Dividend entitlement when the company decides to distribute profits at its meetings.
• Voting power through voting at the General Shareholders’ Meetings.
• Access to information about the company’s financial and operational status.
• Preemptive subscription rights when capital increases are made.
• Participation in asset liquidation if the company is dissolved.

The role of shares in the investment landscape

Shares work similarly but with important restrictions. Any type of company can issue them, not just Public Limited Companies. However, as a participant, you have the right to receive dividends, but you do not have voting rights or decision-making capacity in business decisions.

The liquidity of shares is considerably lower because they are not traded on organized markets. Their price is determined solely by the company’s current financial situation, not by market criteria.

Investment fund shares: A special case

There is a differentiated category: investment fund shares. When you invest in a fund, you are buying shares of that fund, which acts as a professionally managed collective asset. The fund pools assets (bonds and stocks) under a specific investment policy, distributing shares among its investors.

How each instrument is traded

Stocks: They are traded very easily on regulated national and international exchanges. You can buy or sell without knowing the counterparty, using authorized intermediaries. The price fluctuates according to supply and demand in real time.

Corporate shares: They remain outside organized markets. Their buying and selling occur exclusively in the private sphere, requiring direct contact between buyer and seller. This results in very limited liquidity.

Key differences summarized

The role of the shareholder versus the participant

A shareholder is the owner of the company in a certain proportion. They participate in its corporate governance and have a direct interest in its evolution. In contrast, a participant holds a position closer to that of a creditor. They have rights to collect during a set period but without decision-making power or real ownership of the assets.

The importance of the order of priority

There is a critical aspect that many investors are unaware of: the order of priority in case of insolvency. In bankruptcy, creditors with secured debt are paid first, followed by other creditors. Shareholders are always last, which implies a total risk of capital loss if the company fails.

Stocks and CFDs: They are not the same

Stock trading is often confused with Contracts for Difference (CFD) on stocks. Although the CFD replicates the price behavior of a stock, you are not a shareholder if you hold a CFD. You do not get voting rights or attend meetings, although you will receive dividends and benefit from price revaluation.

Conclusion: Make informed decisions

The distinctions between stocks and shares are not academic but practical. Understanding these differences prevents you from acquiring instruments that do not match your objectives. If your goal is profitability through appreciation and dividends, listed stocks or CFDs on stocks offer greater flexibility. If you seek an investment in a private company with less liquidity, shares may be appropriate.

Knowing these details allows you to invest with confidence and true alignment with your financial strategy.