Stock

What is a 'Stock'

A stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

Also known as "shares" or "equity."

BREAKING DOWN 'Stock'

A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings. In other words, a shareholder is an owner of a company. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares. For example, if a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the company's assets.

Stocks are the foundation of nearly every portfolio. Historically, they have outperformed most other investments over the long run.

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RELATED FAQS
  1. Can anyone own common stock in a company?

    Understand who can purchase common stock as well as the key characteristics that differentiate common stock from preferred ... Read Answer >>
  2. What are the advantages and disadvantages of preference shares?

    Learn about the advantages and disadvantages of preference shares to both investors and issuing companies, including the ... Read Answer >>
  3. What are preferred shares?

    Understand what preferred shares are. Learn about both the benefits and the drawbacks of preferred shares, which effects ... Read Answer >>
  4. What are some characteristics of ordinary shares?

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  6. What is the difference between preferred stock and common stock?

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