Stock is an investment security that represents a fractional ownership stake in publicly-traded companies. Investors buy and sell shares of stock on exchanges like the New York Stock Exchange and the Nasdaq. Over the long term, stocks offer a great opportunity for capital appreciation, or increasing value, as well as potentially generating dividends (profits paid out to shareholders). Many investors choose to diversify their portfolio with a mix of stock and bond investments in order to spread risk around and maximize potential gains.

Companies issue stock to raise funds to grow their business. They do so by going through a process called an initial public offering (IPO). Shares of stock are then traded on the stock market, where buyers and sellers determine their own price. Stock prices are constantly fluctuating as the supply of available shares on the market (called a float) and demand change.

When a company is doing well, there is more demand for its stock than supply, so the price goes up. When a company has a bad news story, its stock price usually falls as investors distance themselves from the business. Other factors like global economic conditions, wars and natural disasters may also affect stock prices over the short term.

Some people invest in stocks because they love the products and services a company offers, or because it is socially responsible. Others seek the higher returns offered by stocks, or because they believe that owning a piece of the business is a way to express their individuality and pride in their community. Regardless of why an investor chooses to own stock, over the long haul, those who stick with it have historically been rewarded with strong returns.

Many donors own appreciated assets, such as stocks or mutual funds, but aren’t aware of the benefits of donating those assets to charity rather than making a cash gift. By spreading the word about stock giving, you can offer donors a tax-savvy way to support your work and help them make the most of their assets.