Investing in Apple Inc. makes you both an investor and a shareholder. But the terms "investor" and "shareholder" refer to different relationships. A shareholder can be anyone who invests in a corporation that issues shares, either in a private or public company. On the other hand, an investor is anyone who takes an ownership interest in any type of venture, whether it is a corporation or other business structure.
What Are Shareholders?
A corporation is one form of business operating structure that allows someone to establish an entity with a separate identity from its owners. A corporation can legally represent itself like a person in all business transactions. A corporation can offer fractional ownership interest in itself by issuing shares, where each share represents an interest in the company's profits and losses.
Owners of shares are shareholders, and they enjoy certain rights, such as the ability to vote on issues affecting the corporation. A shareholder can hold interest in a privately held corporation, meaning that the shares are only available to a small group of individuals. A public corporation offers shares to the public, and some corporations have millions of shareholders. Shares of public corporations are openly quoted and traded on a stock exchange or over-the-counter market.
Shareholders as Investors
When you buy stock in a public or private corporation, you're essentially a shareholder and investor. Putting your money into a corporation for investment purposes makes you an investor. You can invest in a corporation for any number of reasons, such as to save for retirement or to trade the shares to make a quick profit. Most people invest in companies to earn money on their investment.
What Are Investors?
An investor is anyone who puts money or anything of value into a business or cause for a financial return. Investors come in all forms. Some investors put money into startup businesses hoping that these companies will become the next industry leaders; these investors are referred to as venture capitalists. Angel investors are wealthy individuals who provide capital to startups in exchange for ownership equity. But an investor can put his money into any business, such as a sole proprietorship, partnership, limited liability company or corporation.
Risks of Investing
Whether you invest in a corporation as a shareholder or small-business concern, there is always a risk that you'll lose your money. If you invest in a public corporation, you can easily track your investment by visiting a financial website or reading the financial section of a newspaper. There is also a wealth of information that public corporations provide to investors in the form of regulatory reports and audited financial statements.
When it comes to investment risk, the Securities and Exchange Commission regulates publicly traded companies. You don't have that luxury if you invest in a private corporation, however, which makes that investment riskier.