What Is a Stock?

A stock (share) is a security that represents a small, equal slice of a joint-stock company's capital and gives its holder ownership rights in that company. When you buy a share, you become a part-owner of that company, however small the stake. Turkey's current Commercial Code names this instrument "pay senedi"; in everyday Turkish, "hisse" is the most common term.

What does a stock represent?

A company's capital is divided into many equal shares. Each share is one slice of the whole. In a company split into a million shares, someone holding a single share owns one-millionth of it. This ownership is not symbolic; it carries rights defined by law and the company's articles of association:

• Dividend right: a portion of any profit the company decides to distribute.
• Voting and attending the general assembly: taking part in the company's decisions at its annual meeting.
• Pre-emption right: priority to buy new shares when the company raises capital.

Shares may be registered (the holder's name is stated) or bearer (transferred by delivery). Today, exchange-traded shares are held electronically in book-entry form, without a physical certificate being printed.

How does a stock's value change?

The price of an exchange-traded share moves constantly. The core driver is supply and demand: if more people want to buy a share than to sell it, the price rises, and vice versa. Behind that demand lie factors such as the company's profit outlook, the state of its sector, the level of interest rates (interest) and the general market mood.

An important point: a stock's value is not guaranteed. It can fall as well as rise, and if a company gets into trouble, much of the money invested can be lost. This uncertainty is what separates a stock from fixed-income instruments like a bond; the return potential may be higher, but so is the fluctuation (volatility).

What is a dividend?

A dividend (temettü) is the part of the net profit a company earns over a period and decides to distribute, paid to shareholders in proportion to their holdings. Under Turkey's Commercial Code, each shareholder is entitled to share in the profit whose distribution has been approved, in proportion to their stake.

A dividend is not compulsory. A company may retain all of its profit to grow and pay no dividend that year. So gains from a stock can come two ways: the price rising above the level at which you bought (capital gain) and any dividend that is paid.

Stock versus equity fund

These two ideas are often confused but are different. A stock is a share in a single company. A equity fund (equity fund), by contrast, is a mutual fund that pools the shares of many different companies on the investor's behalf. Rather than picking individual stocks, someone who invests in the fund shares in a basket of stocks under professional management.

The key difference is the spreading of risk. With a single stock, the outcome depends on that one company; a fund spreads exposure across many companies (diversification). In Turkey, funds that continuously hold a large share of their portfolio in Borsa İstanbul stocks are classified as equity funds; for a related exchange-traded vehicle, see the exchange traded fund entry.

You can review which stocks a fund holds on your behalf, and the funds' historical data, on the /fonlar/hisse-senedi-fonlari page.

In short

A stock is an ownership share in a company, giving its holder rights such as dividends, voting and pre-emption; its value fluctuates with market conditions. You can buy these shares one by one, or share in a fund that holds many of them together; which suits your own situation is for you as the investor to decide. To compare fund costs, the total expense ratio entry may help, and for the notion of return, see return.