What a share actually is
Beginner · 2 min
Most people meet shares as numbers on a screen that move up and down. That is the least useful way to think about them. This lesson is about what you actually own when you buy one, and where the value behind that number comes from.
When you buy a share in a company, you own a piece of that company. Not a bet on its price — an actual slice of the business. If a company has divided itself into one crore shares and you hold a hundred of them, you own a hundred-thousandth of everything it owns and everything it earns.
Where the value comes from
A company sells something and makes a profit. That profit belongs to the people who own the company, and you are now one of them. Some of it is paid out to owners in cash. The rest is kept and spent on making the company bigger, which is meant to make each slice worth more later. The price on the screen is simply what somebody else will pay you today for your slice.
- dividend
- A share of the company's profit paid out to owners in cash. Not every company pays one — a company growing quickly often keeps the money and spends it instead.
- market cap
- What the whole company is worth at today's price: the price of one share multiplied by the number of shares in existence. A company at ₹500 a share with 20 crore shares has a market cap of ₹10,000 crore.
What holding 100 shares means
- Shares the company has issued
- 1,00,00,000
- Shares you hold
- 100
- Your share of the company
- 0.001%
- The company's profit this year
- ₹50,00,00,000
- Your share of that profit
- ₹5,000
You will not receive that ₹5,000 unless the company pays a dividend. It is still yours in the sense that it belongs to the owners rather than to anybody else, and it is the reason the share has a price at all.