What is Stock?

A stock represents ownership in a company. Each share entitles you to a portion of the company’s assets and earnings. When a company issues stock, it sells shares to the public to raise capital. Purchasing a share of stock entitles the holder to a claim on a portion of the corporation's assets and earnings, proportionate to the number of shares owned.

Stocks are classified into common stock and preferred stock. Common stock conveys voting rights at shareholder meetings and potential dividends, though dividend payments are not guaranteed. Preferred stock offers no voting rights but provides a higher, fixed claim on dividends and assets in the event of liquidation.

Stocks trade on public exchanges, such as the New York Stock Exchange (NYSE) or Nasdaq, regulated by the Securities and Exchange Commission (SEC). While stocks offer high historical long-term returns, they are subject to market volatility. Investors can lose their entire principal if the issuing company goes bankrupt.