At a very basic level, a share is nothing but a stake in the ownership of a company. Thus a single share in a company, represents a fractional ownership in the concern, in proportion to the total number of shares outstanding. Any person who holds a share in a company is said to be a shareholder of the company and is entitled to a stake in the assets/profits of a company once all the senior claims/obligations have been discharged.
Consider a scenario where you have a single share of Reliance Industries. This would mean that you in effect, are a part owner of the company, no matter how infinitesimally small. This would entitle you to the residual assets and profits of the company after the discharge of all senior claims like secured and unsecured debts.
To explain it further consider a scenario where you wanted to start a company, but you had only Rs 10,000 of the Rs 100,000 required. You are also not desirous of approaching a bank or a financial institution for the remaining amount. In such a case you can put up Rs 10,000 yourself and approach 9 other people to put up a similar amount. These people would in turn be handed a share each in the company entitling them to a stake in the future assets/profits of the company. A few years down the line, consider that the value of the company has now appreciated to Rs 200,000. The value of each of the original shares would thus have appreciated to Rs 20,000. These initial investor's can now in turn sell their shares to another person at Rs 20,000 and earn a gain of Rs 10,000 which is a 100% return on their initial investment.
Shares are generally traded on a stock exchange and are liquid in nature, which means they can be easily converted into cash. Share prices fluctuate over time and investors/traders try to take advantage of this volatility in prices, by anticipating the direction of price movements. Technical Analysis and Fundamental Analysis are two fields of study aimed at analyzing price movements in stock.
The same article is also present in the form of a Video Tutorial,
If this write-up on a share has stirred your inquisitiveness, please go through the article Technical Analysis Demystified to understand what Technical analysis is all about. Also feel free to let us know about any doubts/queries in the comments section below, and we will try to provide a solution at the earliest.
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