What is a stock & how does it work?

A stock is an investment in a company. But unlike private equity investments, which are typically reserved for accredited investors, thousands of stocks are available for anyone to buy and sell on public exchanges. Let's take a closer look at what a stock is, how stock investing works, and the ways that stock investors can make money.

What is the difference between stocks and shares?

For all intents and purposes, stocks and shares refer to the same thing. The minor distinction between stocks and shares is usually overlooked, and it has more to do with syntax than financial or legal accuracy. To invest in stocks or, more specifically, to invest in shares of a company's stock, you will need your own brokerage account.

Where does the word stock come from?

It is derived from the Proto-Germanic stauk-, which means “tree trunk or stalk" The word stock was used to refer to the equity instruments that represent ownership in a corporation or similar entity since the early 17th century, but the exact reason why it was used to refer to equity ownership is unclear.

What does common stock mean?

Common stock represents shares of ownership in a corporation and the type of stock in which most people invest. When people talk about stocks they are usually referring to common stock. In fact, the great majority of stock is issued is in this form. Common shares represent a claim on profits ( dividends) and confer voting rights.