A stock is an investment instrument that represents a portion of ownership in a publicly traded company. Also known as equities, stocks can be purchased and sold on regulated exchanges like the New York Stock Exchange and Nasdaq. The price of a stock can fluctuate over time for a variety of reasons. It can be affected by investor demand, market conditions and information about the company’s profits.

Companies issue shares of stock to raise money and fund their growth. Investors then purchase these shares to become a part of the company’s success and potentially make money from the rising value of their investments. There are several ways to invest in stocks, including direct investing, mutual funds and retirement accounts.

For individual investors, there are two types of stock: common and preferred. The main difference between the two is that common stocks give shareholders voting rights, which means they can vote in shareholder meetings and receive announced dividends, while preferred shares do not come with these benefits. Preferred stocks also have a higher priority when it comes to receiving earnings and liquidation proceeds, which makes them less risky for investors than common stock.

Stocks are generally categorized by industry and size. This helps investors make comparisons and find an appropriate fit for their investment goals and tolerance for risk. Typical categories include technology, health care, energy and consumer staples. In general, large and well-established companies tend to have lower risk than smaller or emerging ones. The economy and market conditions can also affect a stock’s price. For example, if the economy slows down, consumers may be less likely to spend on discretionary items like technology and travel, which can cause these sectors’ stocks to decline.

One way to measure the success of a business is through its ability to consistently fulfill customer orders. If a business cannot do this, it is considered to be “stocking out,” which can cause customers to be frustrated and lead to lost loyalty. Overstocking can be caused by poor inventory management, machine breakdowns or even inactive stock. Inactive stock is a particular problem because it takes up storage space that could be used for new products or fulfilling existing orders.

Regardless of how you choose to invest in stocks, be sure to consider the tax implications. The amount of capital gains tax you will owe can vary depending on your situation, the type of stock and when you sell it. This can make a big difference in your overall returns. Using SmartAsset’s capital gains calculator can help you understand the impact of taxes on your investment strategy. This tool can also be helpful for determining the best time to sell your shares.