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.

RELATED TERMS
  1. Common Stock

    A security that represents ownership in a corporation. Holders ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  3. Preference Shares

    Company stock with dividends that are paid to shareholders before ...
  4. Common Shareholder

    An individual, business or institution that holds common shares ...
  5. Common Stock Equivalent

    Securities such as stock options, warrants, preferred bonds, ...
  6. Prior Preferred Stock

    A type of preferred stock with a higher claim on assets and dividends ...
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RELATED FAQS
  1. What are the types of share capital?

    Understand the characteristics of common stock and preferred stock, the two ways by which companies obtain share capital ... Read Answer >>
  2. 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 >>
  3. What is common stock and preferred stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ... Read Answer >>
  4. What are the pros and cons of owning preferred stock instead of common stock?

    Understand and explore the advantages and disadvantages of owning preferred stock as opposed to owning common stock shares ... Read Answer >>
  5. 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 >>
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