Companies issue different types of shares to raise money. The two main types are Equity Shares and Preference Shares.
🔹 1. Equity Shares (Ordinary Shares)
These are the most common type of shares that investors buy in the stock market.
✅ Key Features:
- Ownership: You become a part-owner of the company
- Voting Rights: Yes (can vote in company decisions)
- Dividend: Not fixed (depends on company profit)
- Risk: High
- Return Potential: High
👉 Example: When you buy shares of Reliance Industries or Tata Motors, you are buying equity shares.
🔹 2. Preference Shares
These shares give priority over equity shareholders in terms of dividend and repayment.
✅ Key Features:
- Ownership: Limited control
- Voting Rights: Usually No
- Dividend: Fixed rate
- Risk: Lower than equity
- Return Potential: Stable but limited
👉 “Preference” means:
- They get dividend first
- They get paid first if the company is closed (liquidation)
🔁 Key Differences (Easy Comparison)
| Feature | Equity Shares | Preference Shares |
|---|---|---|
| Ownership | Full ownership | Limited |
| Voting Rights | Yes | No (mostly) |
| Dividend | Variable | Fixed |
| Risk | High | Low |
| Return | High potential | Stable |
| Priority in Payment | Last | First |
🧠 Easy Trick to Remember
- Equity = Ownership + Risk + High Reward
- Preference = Priority + Fixed Income + Safety