A stock is a share of ownership in a company. When you buy stock you become a partial owner — called a shareholder — and your investment rises or falls with the company's performance. All investing involves risk, including possible loss of principal.
When a company wants to raise money, it can sell small pieces of ownership to the public. Each piece is called a share of stock. If you own shares in a company, you're a shareholder — you own a proportional slice of that business and its assets. Stocks are bought and sold on exchanges like the New York Stock Exchange (NYSE) and Nasdaq. The SEC's introduction to stocks is the standard starting point for new investors.
Shareholders can profit in two ways: price appreciation (the stock's market price rises and you sell for more than you paid) and dividends (some companies distribute a portion of profits directly to shareholders as cash payments). Neither is guaranteed. Stock prices fluctuate daily based on company earnings, economic conditions, investor sentiment, and countless other factors. A stock can lose significant value — including going to zero if the company goes bankrupt.
Most individual investors buy common stock, which carries voting rights (typically one vote per share on major company decisions) and eligibility for dividends. Preferred stock generally pays fixed dividends and has a higher claim on assets if the company is liquidated, but usually doesn't carry voting rights. You can look up any publicly traded company's filings using the SEC's EDGAR search, including how its shares are structured.
Owning a single company's stock concentrates all your risk in one business. Many investors instead hold stocks through mutual funds or ETFs, which spread risk across dozens or hundreds of companies. The SEC's guide to funds explains how this tradeoff works. This page is educational only — it is not investment advice and does not recommend specific securities.