A stock represents a share of ownership in a corporation, including a claim on the company’s earnings and assets. As such, stockholders are partial owners of the company and can reap returns when the value of the business rises or falls. Stock can be bought or sold through exchanges like the New York Stock Exchange and NASDAQ, or via online brokerage accounts such as Robinhood and E*TRADE. Investing in stocks can be a great way to grow your money over time, but it’s important to do your research before making any decisions. Developing a comprehensive financial plan and applying well-established methods of stock evaluation can help you determine whether stocks make sense for your investing or trading strategy.

A company’s filings with the Securities and Exchange Commission contain a lot of information about its business, including financial statements for recent years. These documents are useful for analyzing the company’s past performance and forecasting its future direction. They can also be used to calculate financial ratios that provide valuable insight into a company’s health and where its stock price might be headed. One of the most common ratios is earnings per share, or EPS. This metric reflects how much a company earns per share of stock, and can be used to compare the company’s profitability with that of its peers.

In addition to financial ratios, you can use a variety of other factors to assess a stock’s value, including the company’s book value and its price-to-sales or price-to-earnings ratio. However, a stock’s price can be influenced by things outside of the company’s control, including investor demand, the perception that a stock is undervalued or overvalued, and macroeconomic conditions.

There are two primary ways that you can earn a return on your investment in a stock: capital gains and dividends. Capital gains occur when you sell your shares for more than you paid to purchase them, while dividends are a portion of the company’s profits that are shared with shareholders. You can use fundamental and technical analysis to understand what’s driving the supply and demand for a particular share, and to predict its future price.

When researching a stock, you may also want to look at its market segment or industry groupings. Many traders compartmentalize the market into sectors such as technology, energy, or financials, and even further break down each sector into individual groups like software, semiconductors, or computer hardware. This can be helpful if you’re looking for strong stocks to buy, or weak ones to short-sell–that is, selling a stock that you believe will fall in price, with the intention of buying it back at a lower price later. This is known as shorting, and can be a very profitable trading strategy when done correctly. However, you should only engage in shorting if you have a comprehensive risk management plan and have sufficient margin or emergency funds available to cover any potential losses. If you don’t have these protections in place, you should limit your exposure to stocks and instead focus on more liquid investments such as bonds and cash.