Investing in stocks is a key way to build wealth. However, it’s important to understand what stocks are and how they work in order to get the most out of your portfolio.

A share of stock is a claim on company assets and earnings, making owners partial owners of the business. Companies raise capital by selling shares of stock to investors through a process called an Initial Public Offering (IPO). IPOs take place after a full valuation of a company and its potential by underwriters, which determines the IPO price. Once a company is publicly traded, its shares are sold on the secondary market—otherwise known as “the stock market.”

The price of a stock can rise and fall based on a variety of factors, some of which are within the control of the company. For example, a company that releases disappointing earnings may see its stock price tumble. Conversely, good news about a company’s growth prospects can send its stock price higher. A number of other external factors can also influence a stock’s price, such as interest rates, crude oil prices, the overall economy, and market cycles (recessions and growth periods).

Stocks are commonly purchased through brokerage accounts that buy and sell shares on exchanges like the New York Stock Exchange or National Association of Securities Dealers (NASDAQ). When it comes to evaluating the success of a stock, it’s important to compare its performance with the overall market or specific industry indexes. These metrics can help you make informed guestimates about a stock’s performance, but they aren’t always accurate.

A stock can be a powerful tool for long-term growth, but it’s not a guarantee that you will earn a return on your investment. If you are investing in the stock market, it’s important to diversify your portfolio with other types of investments, such as bonds.

If you want to buy a company’s stock, you can find out how many shares are available by searching for the company in your brokerage account or navigating to the company website. You can also check its daily volume and average volume, which are indicators of how many shares of the company are being traded each day. Finally, you can view the stock’s high and low prices for the day by looking at its chart.