Beginner4 min readThe Stock Market for Beginners · 2/11
What Is a Share, and What Do You Actually Own?
We hear the word "share" every day, yet few people can say exactly what they bought. A share is not just a number that goes up and down; it is a small piece of a real company.
What you will learn
Understand what a share is and work out your stake in a company.
Know which rights come with a share, and which do not.
The lesson as a short video · 24 seconds · Watch on YouTubeIn this lesson
Picture a company worth far more than any one person could pay. The answer is to split it into many equal pieces, each called a share. Whoever holds a share becomes a small partner in the company, in proportion to the shares they hold.
The whole company, split into 100 equal pieces
You hold 3 pieces = 3%
If the company is 100 pieces and you hold 3, your stake is 3%.
In reality companies are split into millions of shares, not 100, so an ordinary investor's stake is tiny. The idea is the same, though: every share carries the same rights as any other share of its kind.
A worked exampleAn invented company, Sonbola Packaging, has 20,000,000 shares. You bought 2,000. Your stake = 2,000 ÷ 20,000,000 = 0.01%. If the company earns EGP 30,000,000 in a year, your proportional share of that profit would be 0.01% × 30,000,000 = EGP 3,000. That does not mean 3,000 lands in your account, as we will see below.
What do you actually own?
A share gives you a stake in the company as a whole, not in any particular thing inside it. In practice that means:
MythI am a partner, so I can claim my share of the goods in the warehouse.
RealityYou own a slice of the company as a whole. The assets belong to the company, and the company decides how they are used and how profits are paid, through its own decision-making rules.
MythThe company made a profit, so it goes into my account.
RealityThe company may pay part of its profit to shareholders, or keep it to grow. That is a company decision, not an automatic right.
MythMy stake is tiny, so I have no say.
RealityShareholders usually vote at the general meeting in proportion to their shares. Your vote is small, but it exists.
On the other hand, your gain or loss is tied to the company: if it grows and earns more, the market may value your stake at a higher price; if it struggles, it can lose a lot of value.
Watch outA share is not a savings certificate or a deposit. There is no fixed return and nobody guarantees you get back what you paid. How the company performs is one of the main things that affects the value of your investment, but the share price can also move for other reasons.
Know the company behind the share
Open any stock on FoudaLens and read the company name and its sector. Before any number, ask yourself: what would I be a partner in?