What is a stock?

A stock represents a share in the ownership of a company, which means that when you purchase a stock, you are buying a small part of that company. This ownership stakes entitles you to a claim on part of the company’s assets and earnings. Stocks can appreciate in value over time as the company grows, and they may also provide dividends, which are payments made to shareholders out of the company’s profits.

Understanding the nature of stocks is fundamental to investing, as they are a primary way individuals can participate in the market. By owning stocks, investors hope to profit from the company's success through increased stock prices and potential dividends. This distinguishes stocks from other financial instruments, such as loans or bonds, which represent debt rather than ownership.