A stock, or share of ownership in a company, is an investment that can make you rich if the company is successful. A company issues shares of its stock to raise funds and gain investors. The shares are bought and sold in a marketplace called the stock market, or securities exchange, that is regulated by federal, state and local laws. While stocks can be risky, history shows that over the long term, they generally offer higher returns than other types of investments.

Companies issue stock to raise capital, grow their business and reward shareholders. By selling stock, a company can improve its cash flow and pay down debt, and also attract a diverse range of investors who might bring valuable expertise and connections to the business. Companies can also use raised capital to invest in new projects and growth initiatives.

Investors buy and sell shares of stock in two markets: the primary market, where new shares are issued, and the secondary market, where existing shares are traded among investors. Both of these are traded on stock exchanges like the NYSE and NASDAQ. The price of a stock fluctuates based on supply and demand dynamics, and is influenced by various factors, such as economic indicators, interest rates, and investor sentiment. Investors analyze the prices of stocks using various methods, such as fundamental analysis (looking at a company’s overall financial health) and technical analysis (studying price movements and trading volume).

Unlike other corporate assets, such as real estate or equipment, stock represents an ownership stake in the success of a company. As a shareholder, you are entitled to a portion of the company’s profits, which is the foundation of a stock’s value. Some companies choose not to distribute any of their earnings to shareholders, reinvesting instead into the business to drive future growth. Still, those retained earnings are reflected in the company’s share price, and over time can help you realize strong returns on your investment.

In some cases, a stock can also come with voting rights, which can be helpful if you want to help shape the direction of a company. Companies often divide their stock into different share classes, so that some share holders have voting rights while others don’t. This is done for various reasons, including retaining voting power for founders and employees or making sure that the company’s stock is available to a wide range of investors.

While investing in individual stocks can be a great way to diversify your portfolio, it’s important to look at each one as part of a larger portfolio strategy. This includes considering how it will fit into your asset allocation goals and whether it will help you achieve the level of risk-adjusted return that you’re seeking. This is where a good investing platform, such as Robinhood or E*TRADE, can be very useful. Using an investment platform can give you access to a wide variety of publicly traded stocks and make it easy for you to purchase and sell them.