A stock, or share of a public company, represents fractional ownership in a corporation and is sold predominantly through regulated exchanges. It is one of the core tools that many investors use to grow their savings and help them achieve long-term financial goals like retirement and education. But stocks are not without risk, and prices can fall as quickly as they rise. Investors can make money by owning and selling shares, and they may also gain a source of income by purchasing dividend-paying stocks.

Stocks can be traded on an individual basis, or in combination with other types of investments to form a portfolio. Some companies, called mutual funds, buy and sell stocks on behalf of their investors, while others, known as exchange-traded funds (ETFs), invest in a broad group of stocks. Both types are considered a core part of a well-diversified investment portfolio.

A public company issues stock to raise money and give shareholders a stake in the business. Companies may need money to pay off debt, launch new products, or expand operations. By selling stock, a company can reduce its debt and improve its financial situation, which could help its stock price rise. The value of a stock is determined by market forces, including investor demand and the performance of the company and its industry.

There are a variety of different ways to buy and sell stock, but the most common way is through an online brokerage account. There are many brokers to choose from, each with their own fees and trading platforms. Some brokers also offer research and advisory services. There are also direct stock purchase plans, or DSPPs, that let you invest directly in a specific company.

When buying and selling stocks, it is important to consider the stock’s fundamentals, as well as its technical and sentimental factors. It is possible to overpay for a stock if you are looking at only its price-to-earnings ratio, for example, and overlook the company’s fundamental performance. It’s also important to understand how your investment will be taxed, especially if you are investing through an employer-sponsored retirement account or 401(k) plan.

If you are a beginner to the stock market, it’s important to learn how to value stocks before you buy or sell. This is one of the most critical skills in becoming a successful investor, and it can be used to help you find bargains or to avoid paying too much for a company’s shares. You can calculate a stock’s present value by dividing future earnings by your desired rate of return. Different industries have different ways of creating value, so valuation ratios vary by company and industry. For example, a bank’s value might be judged by its assets and how well it grows them, while a retailer’s might be judged by its sales and profit margins. The value of a stock is also affected by investor demand, with strong investor interest tending to lead to higher prices.