A stock is a share of ownership in a publicly-traded company. Investors buy shares to gain a stake in the success of a business and potentially share in profits through dividends or capital gains. The value of a stock can go up or down based on several factors, including growing revenue and profit, changing market trends, government policies and economic conditions.

Companies raise money by selling stocks on the stock market to individuals and institutions, which is why a stock exchange exists to connect people who want to buy or sell shares at a reasonable price. A successful business grows and makes more profits, which increases the value of its stock, which then entices investors to purchase more shares in the company.

The name “stock” also applies to other types of investments, like mutual funds, exchange-traded funds, real estate investment trusts and private equity investments. But when most people use the word, they’re referring to share ownership in a corporation, which is traded on the stock market.

Stocks can be divided into different share classes, with each class carrying its own voting rights and privileges. Common stocks are typically voted on at shareholder meetings and are entitled to a portion of the company’s profits through dividend payments, while preferred shares don’t carry voting rights but receive regular interest payments. In some cases, companies create a mix of share classes so that they can offer different benefits to investors with diverse needs and investing goals.

Aside from the direct financial benefits that a stock can provide, it can also give you exposure to global markets. Many people invest in stocks to diversify their portfolios and increase the likelihood of meeting their long-term financial goals. Choosing the right stock can be daunting, but understanding the basics and using well-established methods for valuation can help you make better choices.

As you learn more about the world of stocks, you may find yourself surrounded by complex financial jargon and terms that you’re not quite sure about. Whether you’re a newcomer to investing or an experienced trader, the more you know about how the stock market works, the easier it is to identify opportunities to help you reach your financial goals.