What Is a Share? The Absolute Basics

🔖 What a share actually is🔗

🎯 The essential: A share is literal, legal ownership of a fraction of a company, not a loan to it and not a side bet on it.

Companies need money to operate and grow, and one way to raise it is to sell small pieces of ownership to the public. Each piece is a share. A company might issue, say, 500 million shares in total, and from that point, owning shares is literally owning a fraction of the business, not a loan to it, not a bet on it, actual ownership.

⚖️ What owning a share legally entitles you to🔗

This isn't just a figure of speech, it's set out in law. Under the Corporations Act 2001 (Cth), shareholders in a public company hold a defined set of legal rights: a right to vote at general meetings on matters like electing directors (Part 2G.2), a right to receive dividends declared by the board on the same terms as every other shareholder in that class of shares (section 254W), and a right to access certain company records. ASIC's own guidance summarises these as falling into four groups: economic rights, voting rights, information rights, and protection against oppressive conduct by those running the company.

None of this is a courtesy extended by the company, it's a statutory entitlement that comes with the share itself, which is exactly why owning even a handful of shares in a company gives you a genuine, enforceable stake in how it's run, not just exposure to its share price.

📊 How common share ownership actually is in Australia🔗

🎯 The essential: Direct share ownership has grown to a decade high, and ETFs are the fastest-growing way Australians are doing it.

The ASX's Australian Investor Study, run every few years, found that 7.7 million Australians held on-exchange investments in 2023, up from 6.6 million in the previous study, the highest proportion of the adult population invested this way in over ten years. Direct Australian shares remain the single most popular on-exchange holding, but ETFs are growing fastest: 20% of investors held an ETF in 2023, up from 15% just three years earlier.

💹 How share prices are actually set🔗

Nobody, not the company, not the exchange, sets a share's price directly. It's whatever a buyer and a seller agree to trade at, right now, on the exchange. If more people want to buy than sell at a given price, the price rises until it finds a new balance. If more want to sell than buy, it falls. That's it, that's the whole mechanism, happening continuously throughout the trading day.

The company itself doesn't receive anything when you buy a share on the exchange, that money goes to whoever sold it to you. The company only raises money directly the first time it issues new shares.

📈 How owning a share makes you money🔗

Two ways, and they're genuinely different. Capital growth is the share itself becoming worth more, if the company grows and becomes more valuable, more people want to own a piece of it, and the price rises. Dividends are the company directly paying out a portion of its profit to shareholders, usually a couple of times a year.

Not every company pays dividends, some reinvest every dollar of profit back into growing the business instead. Neither approach is automatically better, it depends on what stage the company is at and what it can do with the money.

🧺 Shares vs ETFs🔗

Buying individual shares means picking specific companies, one at a time, and building diversification yourself, trade by trade. An ETF does that spreading for you in a single trade, bundling many companies into one fund you can buy as easily as a single share. Neither is wrong, but for a beginner, buying one broad-market ETF is a much faster way to get properly diversified than trying to build the same spread one company at a time.

⚠️ The risk that's specific to single shares🔗

🎯 The essential: A single company can be hit hard by something the rest of the market shrugs off, spreading your money is what protects against that.

This is the part worth sitting with before buying your first individual share: your investment is tied to that one company's fortunes, specifically. A bad year, a failed product, a scandal, a new competitor, any of it can hit the share price hard, in a way that has nothing to do with how the broader market is doing. Spreading money across many companies, whether by picking several yourself or buying an ETF, is what actually reduces this company-specific risk.

❓ Frequently asked questions🔗