What Is Stock?

A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation. This entitles the owner of the stock to a proportion of the corporation's assets and profits equal to how much stock they own. Units of stock are called "shares."

Stocks are bought and sold predominantly on stock exchanges (though there can be private sales as well) and are the foundation of many individual investors' portfolios. These transactions have to conform to government regulations that are meant to protect investors from fraudulent practices. Historically, they have outperformed most other investments over the long run. These investments can be purchased from most online stockbrokers.

KEY TAKEAWAYS

1

A stock is a form of security that indicates the holder has proportionate ownership in the issuing corporation.

2

Corporations issue (sell) stock to raise funds to operate their businesses. There are two main types of stock: common and preferred.

3

Stocks are bought and sold predominantly on stock exchanges, though there can be private sales as well, and they are the foundation of nearly every portfolio.

4

Historically, they have outperformed most other investments over the long run