Stock, also known as equities, are shares in a publicly traded company that represent partial ownership of the company. In other words, shareholders own a part of the company and can expect to get dividends or capital gains when the company does well. In addition, when the company is liquidated, shareholders might have a claim on the assets of the company. Companies issue stocks to raise money for business growth. They are generally sold through a stock exchange, the two primary ones being the New York Stock Exchange and the National Association of Securities Dealers (NASDAQ). The shares can be bought and sold by individuals through investment platforms such as Robinhood or E*TRADE.

The stock market is an important source of wealth building, offering a potential for higher returns than other investments, such as bonds and real estate, over the long haul. But it’s important to keep in mind that stocks can also be volatile and can lose value when the markets sour. To help mitigate the risk, diversifying your portfolio across different industries and companies is a good idea.

In addition to a diversified mix of stocks, it’s a good idea to use different stock metrics to assess your investments. For example, a stock’s price-to-earnings ratio may indicate that it is currently undervalued. However, you should also consider other qualitative factors such as the strength of a company’s business model and its ability to compete in the marketplace. For example, companies with defensible economic moats are more likely to retain customers, while those with large user bases benefit from network effects.

There are several reasons people invest in stocks, ranging from the desire for growth to the desire to support companies they believe in. In general, a company’s stock will appreciate when the company grows and the perception of its future prospects improve. Stockholders can also receive dividend payments and have voting rights, which can influence company decisions at annual general meetings.

While almost anything can cause stock prices to go up, a few major things have the biggest impact. One is the news cycle, with positive or negative news influencing investor confidence and thus stock prices. Another is earnings season, where companies report financial data that either meets or misses expectations. Finally, political or regulatory changes can spook investors and drive stock prices down.

It’s also helpful to keep in mind that stocks are a form of leveraged investment, meaning they carry the risk of greater losses than other asset classes, such as bonds and real estate. As such, they should be used only when you’re willing to accept the risk and have sufficient capacity to absorb losses if the markets decline. If you’re not ready to take on that risk, you should limit your exposure to stocks and focus on other asset classes like cash and fixed income.