A stock, also known as equities, is a security that represents partial ownership of a public company. Depending on the type of stock, its holders may earn dividends when earnings are distributed to shareholders or have voting rights at shareholder meetings. The value of a stock rises or falls as the underlying company’s business and financial performance change. Investors seeking long-term returns typically view a well-diversified portfolio of stocks as a way to grow wealth and outpace inflation over time.

Stocks are bought and sold electronically through stock exchanges such as the New York Stock Exchange or Nasdaq, which match people looking to buy a particular stock with those who want to sell it. The exchanges facilitate the transaction almost instantly. The price of a stock changes as investors’ demand for it rises or falls. For example, when a popular company has positive news about its future, its share prices rise.

The price of a stock can also fluctuate based on global economic and political events, including wars and natural disasters. If investors fear that a company’s prospects are poor, they will likely sell off its shares. This can send a stock’s price lower, especially if it is trading close to its book value.

There are a number of factors that can cause a stock to rise or fall in price, but the most important is how successful the underlying company has been. Investors need to be willing to hold onto their shares for long periods of time, ideally 15 years or more, to see a return on their investment.

Individuals can invest in shares by purchasing them directly from a company or through brokerage firms. Companies issue stocks as a way to raise money for operations or expansion. They can be common or preferred stocks, which differ in the rights of their owners. Common shareholders, for instance, have the right to vote on major issues at shareholder meetings and receive dividends before preferred shareholders do.

When a company has established its reputation as a solid performer, it can increase its market share by issuing more stock. This is called an initial public offering, or IPO, and takes place after the company has undergone a full valuation by underwriters to determine its current and potential worth.

As the market moves, many stocks will form a series of chart patterns that can help traders predict future direction. The most successful trades often occur when a stock breaks through the resistance line that formed in its previous pattern. This is a sign that the stock has enough demand to push higher and can potentially become a strong buy. Investors should carefully weigh all available data and ratios to determine whether a particular stock is a good fit for their investing or trading strategy. There are endless metrics and ratios that can be analyzed, but the most successful investors will take a holistic approach to understanding a business’s financial health and prospects.