A stock, also called a share or equity, represents partial ownership of a company. When a company divides itself into millions of equal pieces and sells those pieces to investors, each piece is a share of stock. If you own 1% of all the shares in a company, you own 1% of that company.
Owning a share gives you several rights. First, you have a claim on the company's assets and earnings — if the company is profitable and decides to distribute some of those profits, shareholders receive dividends proportional to their holdings. Second, you typically have voting rights on major company decisions: who sits on the board, whether to approve major acquisitions, and changes to the company's constitution.
But owning stock is not the same as owning a share of the office furniture or the factory floor. As an ordinary shareholder, your claim comes last in the pecking order. If a company goes bankrupt, it first pays employees, then suppliers, then banks and bondholders. Only after all those creditors are paid does anything flow back to shareholders — who often receive nothing. This residual claim is why shareholders bear the most risk of any financial stakeholder, but also why they can earn the highest returns when things go well.
The value of a stock reflects what investors collectively believe the company is worth. This is not fixed — it changes continuously as new information arrives about the company's performance, its competitors, the economy, and investor sentiment. When profits grow faster than expected, the stock price rises. When profits disappoint, or when the broader economy weakens, prices fall.
Stocks are listed and traded on stock exchanges — the London Stock Exchange, the New York Stock Exchange, and Nasdaq being the largest. Prices are set by the continuous interaction of buyers and sellers throughout trading hours. Understanding stocks is the first step toward understanding how capital markets work and how businesses are valued.