A stock, also called a share certificate or share, represents a unit of ownership in a publicly traded company. When a person or institution buys a share, he or she becomes a shareholder in the company and has a proportional claim on the company’s assets and profits.
When a company wishes to raise capital, it may issue shares to the public in an initial public offering (IPO). The proceeds from the sale of the shares are used to fund the company’s operations and growth. The company’s shares are then traded on a stock exchange such as the New York Stock Exchange (NYSE) or NASDAQ, where the price of the shares fluctuates according to supply and demand.
As a shareholder, you’re entitled to a share of the company’s profits, called dividends, and the right to vote on certain company matters, such as the election of directors. If the company performs well and the share price rises, the shareholder can sell the shares at a profit. However, if the company doesn’t perform well and the share price falls, the shareholder can lose money.
It’s important to know that stocks are considered a higher-risk, higher-return investment than bonds or savings accounts. It’s important to have a well-defined investment strategy and diversify the investment portfolio.