What is a Stock

A stock (also known as "shares" and "equity) 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 stockholders generally do not have voting rights, though they have a higher claim on assets and earnings than the common stockholders. 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.

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. These investments can be purchased from most online stock brokers.