What are stocks?

Stocks represent shares of ownership in a company, giving the stockholder a claim on a portion of the company’s assets and earnings. When an individual purchases stock, they are essentially buying a small piece of that company, which can increase in value if the company performs well. This ownership typically comes with voting rights on certain corporate matters, such as electing the board of directors or approving major changes.

The value of stocks can fluctuate based on various factors, including company performance, market conditions, and investor sentiment. Investors can profit from stocks in two primary ways: capital appreciation, when the stock price rises, and dividends, which are distributions of a portion of the company’s earnings to its shareholders.

Understanding stocks is a fundamental aspect of investing, as they are a key component of the equity markets and can significantly impact an investor's overall portfolio performance, depending on how they are managed and incorporated with other investment strategies.