Share (finance) facts for kids
A share is like a small piece of ownership in something big, usually a company. When you own a share, you own a tiny part of that company. Shares are used for many financial things, such as stocks, mutual funds, and even some types of property investments called REITs. In countries like the United Kingdom, people often just say "shares" when they mean "stocks."
Contents
A share represents a unit of ownership. Think of a big cake. If you cut it into many slices, each slice is like a share. When you buy a share in a company, you become one of its owners. This means you have a claim on the company's earnings and assets.
Companies sell shares to raise money. They use this money to grow their business, develop new products, or expand into new markets. When you buy a share, you are investing in that company's future.
There are different kinds of shares, but the most common are:
- Stocks: These are the most well-known type of share. When you buy a stock, you own a piece of a company.
- Mutual Funds: A mutual fund collects money from many investors. It then uses this money to buy a mix of stocks, bonds, and other investments. When you invest in a mutual fund, you own shares of that fund.
- Limited Partnerships: These are business structures where some owners have limited responsibility. Shares in these partnerships represent ownership.
- REITs (Real Estate Investment Trusts): REITs own and manage income-producing real estate. You can buy shares in a REIT to invest in real estate without directly buying properties.
When you buy a share, you are hoping its value will go up over time. If the company does well, its shares might become more valuable. You could then sell your shares for more than you paid for them. Some companies also pay out a portion of their profits to shareholders. This payment is called a dividend.
Shares are usually bought and sold on a stock exchange. This is a marketplace where investors trade shares. A stockbroker or an online trading platform helps people buy and sell shares. The price of a share can change every day based on how many people want to buy or sell it.
Risks and Rewards
Investing in shares has both risks and rewards.
- Rewards: If a company grows and makes more money, the value of its shares can increase. You might also receive dividends.
- Risks: The value of shares can also go down. If a company does not do well, its shares might lose value. It is possible to lose money when investing in shares.
Images for kids
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A share certificate from 1936 entitling the holder to shares in Greyhound Lines.
See also
In Spanish: Acción (finanzas) para niños
