Stock

Definition of Stock

Stock, also known as equity or shares, refers to ownership units in a company that represent a proportional ownership interest in the company's assets, earnings, and voting rights.

Companies issue stock to raise capital and fund operations, offering investors an opportunity to become partial owners.

Stock ownership enables investors to benefit from potential capital appreciation, dividends, and a say in corporate decisions through voting in shareholder meetings.

What is Stock?

Stock is an ownership in a company and is issued in the form of shares. When an individual or entity buys stock, they become a shareholder, granting them a stake in the company's ownership.

Shareholders may earn returns through capital appreciation as the stock's value increases and through dividends distributed by the company.

Owning stock also provides shareholders with the right to participate in the company's governance by voting on important decisions.

Types of Stock

Common Stocks

These represent the basic ownership in a company and provide voting rights in shareholder meetings. Common shareholders may receive dividends, but their claims on company assets come after bondholders and preferred shareholders.

Preferred Stocks

Preferred shareholders receive dividends before common shareholders and have a higher claim on company assets in case of bankruptcy. However, they generally do not have voting rights.

Blue-Chip Stocks

Stocks of well-established, financially stable companies with a history of steady performance and often considered safer investments.

Growth Stocks

Stocks of companies expected to have above-average growth in earnings and potentially higher share prices. These companies reinvest profits for expansion rather than paying dividends.

Value Stocks

Stocks of companies considered undervalued by the market, potentially offering favorable returns as the market corrects its valuation.

Dividend Stocks

Companies that regularly distribute dividends to shareholders, providing a steady income stream.

Small-Cap, Mid-Cap, Large-Cap Stocks

Categorized by market capitalization, representing small, medium-sized, or large companies, respectively.

Cyclical Stocks

Tied to economic cycles, these stocks perform well during economic expansions and may struggle during downturns.

Defensive Stocks

Stocks of companies that provide stable performance during economic downturns, often associated with essential goods or services.

Tech Stocks

Stocks of technology companies that may offer high growth potential due to innovation and market demand.