## When you invest, do you really know what you're buying? Stocks vs. participations

Many traders and small investors discover too late that not all financial titles work the same way. The confusion between stocks and participations is more common than it seems, and making this mistake can cost you money and profit opportunities you didn't take advantage of. In modern trading platforms, understanding this distinction is not an academic luxury but a practical necessity.

## The two sides of capital: fractional parts with different rules

Both stocks and participations represent fractions of a company's capital. That’s where the similarity ends. While **a stock** can only be issued by a Corporation and makes you a owner with voting rights over the company, **a participation** can be issued by any type of company and functions more like a creditor.

The reason is simple: as a shareholder, you have a voice in business decisions; as a participant, you only have the right to receive profits. That’s why participations are almost never traded on stock exchanges: their price is not set by the market but by the company's internal accounting situation.

## Rights you have and rights you lose

**As a shareholder in a common stock, you get:**
- Dividend payments when the company decides to distribute profits
- Voting rights and participation in General Meetings
- Preemptive subscription rights if there are capital increases
- Financial and legal information about the company
- Liquidation quota if the company dissolves

**As a participant, you only get:**
- Dividend payments (if any)
- Nothing more. No voting, no influence, no participation in decisions

This is why investing in participations is more similar to lending money than owning.

## The market versus private agreement

Stocks can be traded on regulated exchanges (Wall Street, Nasdaq, Madrid Stock Exchange) where thousands of transactions occur daily with anonymous counterparties. Your broker, intermediary, or financial entity makes the operation possible.

Participations, on the other hand, live in the private world. If you want to buy or sell a participation, you need to directly know who holds it and negotiate with them. There is no open market, no transparent price, no facilitating intermediaries. This makes them much less liquid and harder to liquidate quickly.

## CFD on stocks: access without ownership

When you trade stocks through CFD (Contracts for Difference), you get almost everything except voting rights. The CFD exactly replicates the behavior of the stock: same price, same dividends, same fluctuations. But legally, you are not a shareholder, only an investor in a derivative.

This has advantages (lower initial cost, short operations, greater flexibility) and disadvantages (no voting rights, no liquidation quota, no preemptive subscription).

## Quick comparison table

| Aspect | Stocks | Participations | Stock CFDs |
|--------|---------|------------------|------------|
| Legal figure | Shareholder | Participant | Investor |
| Role in company | Owner | Creditor | None |
| Voting rights | Yes | No | No |
| Dividends | Yes | Yes | Yes |
| Trading | Regulated exchange | Private | Regulated exchange |
| Liquidity | High | Very low | High |
| Price | Supply/Demand | Company accounting | Underlying dependent |

## Participations in investment funds

When you buy an investment fund, you are actually acquiring participations in the fund, not in the fund itself. That is: the fund pools billions in stocks and bonds, and you obtain a small proportional part of that total assets. Spanish funds must have at least 100 participants and 3 million euros of managed capital.

## The order of precedence: who gets paid first in a bankruptcy

This is the piece of information traders ignore the most but that hurts the most if it happens. In case of corporate insolvency, the order of payment is:

1. Creditors with secured debt (mortgages, bonds)
2. General creditors
3. Participants and bondholders
4. Shareholders (always last)

If you invest in a "penny stock" of a troubled company, there are real chances you will lose 100% before other investors recover anything.

## Why platforms like MiTrade offer stocks and CFDs, not participations

Corporate participations do not have an open market because their purpose is different: they are a private investment vehicle, not speculative. Traders and trading platforms operate with (listed) stocks or CFD (stock derivatives) because they are tradable, liquid assets with transparent prices.

Participations in funds, on the other hand, are traded on specialized fund platforms, with daily frequency but without the liquidity of a stock exchange.

## Conclusion: choose according to your goal

If your strategy is to obtain quick profitability through appreciation or short-term trading, stocks and their CFDs are your territory.

If you prefer passive long-term returns and have access to attractive private participations, that’s another route.

What matters is that now you know exactly what the difference is between stocks and participations, what rights you have in each case, and why a trading platform offers you some things and not others. With this information, your investment decisions will be much more conscious and strategic.