A stock represents a share of ownership in a company. When you buy stock in a company, you become a partial owner, known as a shareholder. This ownership gives you certain rights and potential financial benefits.
Key Concepts:
- Ownership: Owning stock means you own a piece of the company
- Voting Rights: Most stocks give you the right to vote on company decisions
- Dividends: Some companies pay shareholders a portion of profits
- Capital Appreciation: Stock value can increase over time
Types of Stock:
Common Stock: Provides voting rights and potential dividends. Most stocks traded are common stocks.
Preferred Stock: Usually pays fixed dividends but has limited voting rights. Gets priority over common stock.
Why Do Companies Issue Stock?
Companies issue stock to raise capital for growth, expansion, research and development, or other business needs. Instead of borrowing money, they sell ownership stakes to investors.
When you buy stock, you're investing in a company's future success. If the company does well, your stock value may increase. If it struggles, the value may decrease.