What are shares, funds?
Stocks, funds, IPOs
A share is a security that is issued by the company when it needs additional financing. Once the company has issued shares, it becomes public, which means it discloses information about its income, profits and losses, and all investors, who bought shares, become co-owners of the company. Companies use the financing to develop their businesses, and shareholders gain profit if the share price starts to rise.
Funds are a market tool that allows you to invest in several companies at a low price. This is how it is done: a management company sets up a fund, collects money from various investors, and invests it in financial instruments: shares, bonds, real estate, and so forth.
You, as an investor, buy units (that's how the fund's shares are called) and, at the same time, portions of the instruments, in which the fund is invested. For instance, the ETF on S&P 500 replicates the index and owns shares of all 505 companies. You must admit that it costs a pretty penny to buy even one share of all the index participants, while it will be no trouble to buy a share of the fund. For instance, the price for SPDR S&P 500 ETF Trust is about $450.