Shares vs. Stakes: A Practical Guide to Understanding Where to Invest Your Capital

When you start exploring the world of investments, one of the first dilemmas you face is understanding the differences between shares and participations. Although both represent parts of a company’s capital, the similarities end there. Choosing the wrong one can cost money and limit your rights as an investor.

Why is it crucial to understand these differences?

The reason is simple: owning a company is not the same as being a simple creditor. The financial and legal consequences of each position are radically different, especially when things get tough.

Shares: owning a real portion

A share is an aliquot part of a company’s share capital. When you buy a share, you literally become an owner of the company in the proportion you acquire. If you own 1% of the shares, you own 1% of the business.

What makes the shareholder position powerful is the set of rights you obtain:

Economic and decision rights: You have the right to receive dividends when the company decides to distribute profits. You can also access the company’s accounting and legal information. But most importantly, you have voting power at the General Shareholders’ Meetings, where strategic decisions about the company’s future are made. If you control enough shares, you can directly influence how the business is managed.

Additionally, if the company issues new shares or convertible bonds, you have preemptive subscription rights to maintain your ownership percentage. In case of liquidation, you are also entitled to a share of the remaining assets.

The indefinite nature of shares is another key aspect: they have no expiration date. You can hold them as long as the company exists.

Participations: the limited alternative

Participations work in a completely different way. They are also parts of the capital, but with significant restrictions.

Unlike shares, which can only be issued by Corporations, any type of company can issue participations. This makes them more flexible in certain contexts but less stable for the investor.

What you lose with participations: You do not have voting rights nor can you attend shareholder meetings. Essentially, your role is that of a creditor: you receive dividends (if the company decides to distribute), but nothing more. You have no say in the company’s decisions.

Participations come with a predetermined validity period specified at issuance. They are not indefinite like shares but have an expiration date.

The most limiting aspect is the negotiation: participations are not traded on stock exchanges or regulated markets. They are only sold privately, with personal knowledge of the buyer or seller. This means virtually no liquidity and prices set by accounting criteria and business outlooks, not by market supply and demand.

Participations in investment funds: a whole different world

When you buy an investment fund, technically you are acquiring participations in that fund. An investment fund is a collective asset managed by a Management Company that invests in shares and bonds according to its defined policy.

Here, the dynamic is different: you do not invest directly in companies but entrust your money to professionals who build a diversified portfolio. The fund’s participations are divided among investors according to their contribution.

How does all this affect buying and selling

If you want to buy shares, you have options. If they are listed on the stock exchange, it’s simple: go to a broker, place an order, and it executes automatically against thousands of other anonymous buyers and sellers. The transaction is quick, secure, and accessible.

Buying corporate participations is a much more tedious private process. You need to contact the seller directly, negotiate terms, and handle all bureaucracy without regulated intermediaries. This makes quick liquidity practically impossible.

The critical factor everyone forgets: the order of priority

Here’s what really matters if something goes wrong. The order of priority determines who gets paid first in case of bankruptcy.

The hierarchy is as follows: Secured creditors (like mortgage holders) are paid first. Then follow other creditors. Shareholders are at the end of the line, being the last to receive anything if the company liquidates.

In practice, this means that if you invest in shares of a financially troubled company, you are very likely to lose your entire investment. Participations, being closer to a creditor position, might be slightly better positioned, but they do not guarantee anything.

Shareholder vs. Participant: completely different roles

A shareholder is an owner interested in the company’s success. Their profitability depends on the business thriving. They have decision-making power and voting rights.

A participant is simply someone who receives periodic payments. They are more like a lender than an owner. Their relationship with the company is contractual, not ownership.

CFDs: when you don’t have to be an owner

Contracts for Difference (CFD) on shares replicate the behavior of real shares. They go up and down the same way, and you even receive dividends, but you are not a real shareholder.

Advantages? Lower costs, greater operational agility, access to short positions, less capital required.

Disadvantages? No voting rights, no attendance at meetings, no preemptive subscription rights. But if your interest is speculative profitability, you don’t need these rights.

Quick comparison table: what you have in each scenario

Similarities you should not overlook

Both represent parts of the capital, so in theory, you have a real portion of something. Both can be accumulated; you can hold multiple shares or participations from different companies. And both are indivisible, always assigned to a specific holder.

Conclusion: choose wisely

Trading platforms usually offer shares and CFDs on shares, rarely corporate participations. The reason is that the latter are illiquid and difficult to operate in mass.

The differences between shares and participations are not trivial. If you seek quick profitability and easy access, shares or CFDs on shares are your path. If you prefer long-term stability with less volatility, you will need to evaluate participations in professionally managed investment funds.

What matters most is to know exactly what you are buying, how it works, and what rights you truly possess. That clarity determines whether your investment experience is profitable and free of unpleasant surprises.