What is a stock?

Stock

A stock represents partial ownership in a publicly traded company and a proportional claim on its assets and earnings. When an investor purchases shares of stock, they become a shareholder of the issuing company.

Stock ownership may provide:

• The potential for capital appreciation if the company’s value increases
• The possibility of dividend payments, if declared by the company
• Voting rights on certain corporate matters, depending on the type of stock

Stock prices fluctuate based on company performance, market conditions, investor sentiment, and broader economic factors.

There are two main types of Stock that are issued

Common Stock

Common stock is the most widely issued type of equity security. Holders of common stock typically have:

• Voting rights in corporate elections (such as board members)
• The potential to receive dividends, if declared
• Residual claims on company assets after creditors and preferred shareholders
• Priority over common stock for dividend payments
• Priority over common stock in liquidation

In the event of liquidation, common shareholders are last in priority to receive proceeds.

Preferred Stock

Preferred stock is a class of equity that generally provides:

Preferred stock typically does not carry voting rights and may have characteristics similar to both stocks and bonds.