Stocks, or company shares, are a fundamental part of many people’s plans to build wealth. However, they can also be intimidating for new investors. Taking the time to understand the basics of stocks can help you make wiser investment choices that will help you achieve your financial goals.

Shares of a corporation or company represent a fractional ownership of the business in proportion to the total number of shares. A single share of stock can be bought or sold on the market at any time, and the price of a stock is determined by what buyers and sellers are willing to pay for it at a given moment. A stock’s current share price reflects the last transaction in which investors offered to sell their shares at a certain price and other investors accepted that offer. The price of a stock can be affected by a variety of factors, including the strength of the economy, competition in the industry, advances in technology and other market influences.

A company’s stock can be traded on the primary market through an initial public offering, in which a large number of shares are initially sold to investors. This raises capital for the business and often enables it to expand into other markets more quickly than it could otherwise afford to do. Stocks are also sold in the secondary market through brokers, or in a more direct way through derivatives that allow traders to control large blocks of stocks for less money than they would have to spend on the actual shares themselves.

There are a variety of different types of stocks, each with its own unique characteristics and benefits. For example, preferred stock may have the right to be converted into common stock in certain circumstances. Another type of stock is treasury stock, which represents the amount of common stock that a business has purchased from the market and retained on its balance sheet. In addition, a person can own stock through a brokerage account, where a computer or human broker buys and sells the stocks on his or her behalf.

Owning stock in a company gives shareholders the right to vote on management changes, and to receive dividends if the company pays them. It also offers a degree of protection from liability should the company go bankrupt. However, even the most promising companies will not always see their stocks increase in value.

The intrinsic value of a stock is the amount that an investor will be willing to pay for the shares, based on his or her assessment of the future profitability and growth potential of the company. To arrive at this valuation, analysts use a range of stock metrics. These include revenue growth, earnings per share and other indicators of how well a company is performing. However, it is important to remember that no one method of valuing a stock should be used in isolation. To be successful, you must combine a thorough understanding of the company in question with a sound analysis of the overall market conditions.