{"id":121755,"date":"2023-11-07T07:02:55","date_gmt":"2023-11-07T07:02:55","guid":{"rendered":"https:\/\/www.techopedia.com\/?post_type=definition&p=121755"},"modified":"2023-11-07T17:17:59","modified_gmt":"2023-11-07T17:17:59","slug":"stock","status":"publish","type":"definition","link":"https:\/\/www.techopedia.com\/definition\/stock","title":{"rendered":"Stock"},"content":{"rendered":"

What is a Stock?<\/span><\/h2>\n

A stock is a financial asset or security that represents ownership of a company\u2019s equity. In effect, when you buy a stock, you are buying a small share of that company.<\/p>\n

Companies issue stocks to raise capital, allowing them to finance their growth and expansion or repay debt. In return, investors who purchase these stocks become shareholders in the company, giving them certain rights, such as voting on major operational decisions and potential financial benefits, such as dividends.<\/p>\n

Stocks are traded \u2013 that is, bought and sold — primarily on stock exchanges such as the New York Stock Exchange<\/a>. These exchanges are regulated by governments with the aim of protecting investors from fraud and unethical practices.<\/p>\n

Stocks tend to form the basis of many individual investors’ portfolios, which they diversify with bonds<\/a>, commodities<\/a>, currencies<\/a>, and other assets.<\/p>\n

What is the difference between stocks and shares? While the terms \u201cstocks\u201d and \u201cshares\u201d tend to be used interchangeably, a share is a unit of a stock.<\/p>\n

Who is a Shareholder?<\/span><\/h2>\n

A shareholder owns at least one share of a company’s stock, which grants them ownership of a stake in the company. Their ownership is relative to the number of shares they own as a proportion of the total number of shares the company has issued, known as shares outstanding.<\/p>\n

For example, if a shareholder owns 10% of a company\u2019s outstanding shares, it does not own a 10% stake in the company but a 10% stake in the share issuance.<\/p>\n

In return for their investment, shareholders can receive a share of the company\u2019s profits, which are paid out as dividends. The amount of dividends received is based on the number of shares an investor holds.<\/p>\n

Some companies do not pay dividends but reinvest the profits to drive the growth of the business, which increases the share price. Some companies also buy back shares, which supports the share price by reducing the number of shares outstanding.<\/p>\n

Types of Stocks<\/span><\/h2>\n

\"Types<\/p>\n

There are two main types of stocks:<\/p>\n