Recently, I was reading about investments when I realized something that surprises many beginners: most people confuse shares with participations without truly understanding what difference exists between shares and participations. Believe me, they are not the same, and that confusion can cost you money.

Let’s start with the basics. Shares are portions of a company’s capital that can only be issued by Sociedades Anónimas. When you buy a share, you literally become an owner of that company—even if it’s just a small part. You’re entitled to dividends, you can vote at shareholder meetings, and if the company is liquidated, you’re among the last to be paid, but at least you receive something.

Participations, on the other hand, are similar but with important differences. Any type of company can issue them, not just Sociedades Anónimas. Here’s the interesting part: you have the right to dividends, but you don’t have voting rights. It’s more like being a creditor than an owner. And most importantly, they are not traded on exchanges, so if you want to sell them, you have to find the buyer yourself.

The difference between shares and participations shows up a lot in liquidity. Shares move in regulated markets where anyone can buy or sell in a click. Business participations are slower, more private, and their price isn’t set by the market—it’s determined by the company’s current financial situation.

Now, there’s another type of participation that confuses people: those of investment funds. When you invest in a fund, what you buy are participations in that fund. The fund manager invests your money in shares and bonds according to their strategy, and you receive a proportional share of the results.

If you’re an active trader, like many in the community, you probably trade CFDs on shares more than actual shares. CFDs behave exactly like shares in terms of price and dividends, but you are not a real shareholder, so you lose voting rights and the right to attend meetings. The advantage is that they are cheaper, more agile, and you can trade on a short basis.

The difference between shares and participations also matters if you invest in troubled companies. In bankruptcy, the order of priority says that creditors are paid first, shareholders last. If you hold participations, you’re closer to a creditor than an owner, so your position is different.

In summary, if you want to be an owner with decision-making power, buy shares listed on exchanges. If you’re only looking for returns without control, participations or CFDs may be your option. What matters is knowing exactly what you’re buying before putting money in.