Stocks are a key component of many portfolios. They have a history of providing higher growth potential than bonds or cash alternatives, but they can also be more volatile. Investors may experience ups and downs in the market, influenced by everything from global events to company performance. As a result, it’s important to carefully consider your risk tolerance and investment goals before making any commitments to stocks.

A stock represents partial ownership of a publicly traded company. Each share is equal to a unit of ownership, and the more shares you buy, the larger your ownership stake in the company. Companies issue shares to raise capital and grow their business. They can then be sold in the market to other investors, and their value will fluctuate.

Unlike other assets, stocks are highly liquid, meaning that it’s usually easy to find buyers and sellers for them. This liquidity makes them more accessible than other assets like real estate, which can take longer to sell and can be affected by a variety of factors.

In addition to being easy to buy and sell, stocks can offer a number of benefits for investors. Some examples include the ability to generate income through dividends, and their tendency to rise in tandem with the economy. Additionally, many people have a retirement account with their employer, which is often invested in stocks through mutual funds that hold a broad range of different company shares.

The two largest exchanges for buying and selling stock are the NYSE (in downtown Manhattan) and Nasdaq (in midtown). However, if you’re a retail investor, it doesn’t matter much which exchange your stocks are listed on because most national discount brokerage firms allow you to purchase shares regardless of which exchange they’re on.

It’s important to remember that stock returns must be viewed in the context of an appropriate benchmark. For example, it’s important to look at the total return of a stock over a period of time, taking into account other fees like transaction costs and management fees. Additionally, it’s essential to compare a stock’s performance against its industry, not just against the overall market.

It’s also important to understand that when you invest in stocks, you are investing in the potential future earnings of a company. This can be a great way to build wealth over the long term, but it is not a guaranteed way to get rich. Even when the average stock has delivered a positive return, it’s not always possible to predict what individual stocks will do, and even the most well-diversified portfolio can have ups and downs. This is why it’s generally smart to diversify your investments across asset classes.