Companies sell shares of ownership (stock) on the stock market to raise money for business growth and expansion. Investors buy and sell those stocks based on their potential to go up in value or pay dividends. They can do this by opening an investment account at a financial institution and then investing in stocks through that institution or working with a broker who can handle market transactions on their behalf.

Unlike bonds, which are typically sold by governments and banks to investors in order to fund public projects or businesses, stocks can be traded between individuals on an international exchange. This makes them a more liquid form of investment compared to real estate investments and other assets that may take longer to sell when the investor is ready to move on.

A share of stock represents a fractional ownership of a company and gives the owner a direct claim on the company’s assets and earnings. When a company performs well, its stock price rises and when it underperforms, its stock price falls. The stock market is made up of investors who collectively decide a share’s fair price based on supply and demand, which is reflected in the stock prices that appear on news websites or in financial publications.

Investors who own stocks are also able to participate in the company’s success by voting on how the company is managed, as well as receiving dividends (a portion of profits) that are distributed to shareholders. These dividends can help supplement income, especially when they are reinvested into the company to grow further, which ultimately leads to a higher stock price. However, not all companies pay dividends as they reinvest most of their profits to support future growth and expand into new markets.

One of the main advantages of stocks is that they have historically correlated with the economy, meaning that as the economy grows, the value of the stocks can also rise. This provides an opportunity for long-term investors to make a significant return on their investments over time.

When companies are looking to grow, they need money to pay for things like designing new products, hiring employees and expanding into new markets. In order to raise the money they need, they offer new shares of stock in their business through an initial public offering (IPO). The price at which a company offers its shares on the market is called its share price. The higher the share price, the more people will want to invest in that company.

Most stocks are traded publicly on the major stock exchanges in countries around the world, such as the NYSE and Nasdaq. They can be grouped into categories based on the size of the company, with large-cap and mid-cap being the largest groups. Then there are small-cap and micro-cap stocks, with the very lowest priced stocks being known as penny stocks, which have very little earnings or assets and are considered highly speculative. This grouping makes it easier to understand how the different types of stocks relate to each other and can be helpful when researching individual companies.