Recently, a friend asked me what the difference is between stocks and shares, and I realized that many people are actually confused about these two concepts. So I decided to organize my understanding and share it with everyone.

Let's start with the basics. When a company decides to issue stocks, it is actually selling ownership shares of the company. If you buy these shares, you become a shareholder and can receive a portion of the company's profits, which we often call dividends. If the company performs well and the stock price rises, you can also make a profit by selling it. That’s why so many people are enthusiastic about stock trading.

Regarding the difference between stocks and shares, my personal understanding is this. Stocks usually specifically refer to equity securities of listed companies, while shares are a broader term that can include stocks as well as investment products like funds and ETFs. Simply put, shares are a general concept, and stocks are a more specific one.

Why does a company have to issue shares? It’s mainly because they need money. Maybe to pay off debts, launch new products, expand into new markets, or build new factories. Raising funds through issuing shares is the most direct method.

Conversely, why do investors buy stocks and shares? Besides wanting to profit from price differences, there are a few other attractive points. First, capital appreciation—if the stock price goes up, your paper gains increase. Second, dividend income—if the company makes a profit, it distributes part of it to shareholders. Third, voting rights—holders of common stocks can vote on some major company decisions.

Regarding types of stocks, they are mainly divided into two categories. Common stocks give you voting rights, but in case of bankruptcy, your claims are lower in priority. Preferred stocks do not have voting rights, but in bankruptcy, they have priority in claims and also receive dividends first.

Further subdividing, there are growth stocks and value stocks. Growth stocks come from companies whose growth rate far exceeds the market average; they are riskier but have greater potential. Value stocks are usually issued by mature, stable companies with steady profitability, undervalued prices, lower risks and volatility, and often pay dividends. Choosing between them mainly depends on your risk tolerance and investment goals.