If you are considering investing in the stock market it pays to learn the
differences between the various types of shares you can buy. If you assume all
shares are the same you might end up buying something you don’t really want.
Let’s take a look at the different types of shares that are available.
Float shares – these are the most popular types of shares you will come across.
The float is basically the amount of shares that are ready to be bought by the
general public. They are the shares which are in use and available. Think of the
float in cash till and you will see that the same idea applies here.
Restricted shares – as the name suggests, these shares have restrictions placed
on them. This doesn’t mean they cannot be bought, but the Securities and
Exchange Commission must give their approval to such a purchase before it can
Outstanding shares – these shares are what the company has released for
purchase. So the above two types of shares – the float shares and the restricted
shares – can both be added together to form the number of outstanding shares
which are available.
Authorized shares – this is the number of shares the company first started
off with. It should be noted that this wouldn’t necessarily be the same as the
number of shares available to be bought. For example a company may agree
initially to release one million shares. But it could be that only nine hundred
thousand of those shares will be available to be bought, either in restricted or
Unissued shares – the name tells us what these shares are. Let’s think about
the above example again, and the company that created a million shares to
begin with. We have already seen that the company has issued nine hundred
thousand shares in the form of float and restricted shares. The remaining one
hundred thousand shares would be kept back and regarded as unissued shares –
simply because they were not issued in the first place.
As you can see, although the different types of stock shares look complex to
begin with, they are really all quite easy to understand. And there is no doubt
that understanding what all the different types of shares mean will help you
enormously when it comes to investing in them for the future.