Stocks, company shares, equities—whatever you call them, these investments are an essential part of many people’s wealth-building strategy. They can be one of the most important ways to grow your savings and help you meet long-term goals like retirement and education. But stocks come with risks and can lose value, too.

In short, a stock is an ownership stake in a publicly-traded company. Public companies raise money by selling shares in their business, and investors buy them in hopes that they will increase in value over the longer term. Companies use the proceeds from selling shares to pay for things like growth, paying off debt, or expanding operations. If you own a share of stock, you can receive dividends when the company pays out its earnings, and you can vote at shareholder meetings.

You can buy and sell stock through a brokerage account, which is like an investment bank for individual investors. Stocks are a core element of most retirement and education savings plans, but they’re not without risk. If prices go down, your savings will lose value and you may not be able to recoup your original investment. As a result, investors tend to diversify their portfolios with a mix of stocks and other types of assets.

When deciding whether to invest in a particular stock, you’ll want to compare it with other similar companies. You can do this using a variety of metrics, including the price-to-earnings ratio (P/E). P/E is based on the current price per share divided by the company’s per-share earnings. It’s not the only metric to consider, but it’s one of the most common.

Other important considerations include the market’s outlook and the company’s profitability. For example, if interest rates rise, many investors will move their money into bonds and other fixed-income investments, which can push down stock prices and drive up bond prices. Alternatively, if you own a tech company that’s expected to be a big winner in the future, its stock could see a surge in demand.

Moreover, there are different classes of stock that exist to give shareholders more or less voting power and other privileges. For instance, Alphabet (GOOGL), the parent company of Google, has three classes of stock: Class A, class B, and class C. Each gets a different number of votes, and class B and C shares are not available to the general public.

Another way to categorize stocks is by size. There are large-cap, mid-cap, and small-cap stocks, with very small companies referred to as microcap stocks. Small-cap and micro-cap stocks can be a volatile investment, since they typically have fewer resources than large-cap companies. This can make them more vulnerable to changes in the economy and competition.