A stock is a piece of ownership in a company that represents a fractional share of the company’s assets and earnings. Purchasing a share of stock gives the owner a voting right and the opportunity to receive dividends (profits) as the company earns them. Many investors hope that a stock will increase in value over time, so they can sell it for a profit. Stocks are typically considered an important part of an investment portfolio because they can offer higher returns than other investments.

The price of a stock is determined by supply and demand. There is a constant struggle between the number of shares available for sale and the amount investors want to buy at any given moment. The result is that the stock’s price constantly moves in order to achieve equilibrium between supply and demand.

Understanding stock valuation results can help you make better investment decisions. For example, if the company’s stock has a high price to earnings ratio, it may mean that its shareholders believe the company is overpriced or that they expect strong growth in future years.

Other factors that influence stock prices include macroeconomic trends, such as interest rates and unemployment, and investor sentiment. Additionally, the industry can affect prices as a whole, and the performance of competitors may have an impact on whether a specific stock is worth buying or selling.

There are a number of different types of stock, with each type offering its own advantages and disadvantages. Common stocks, for example, provide broad sector exposure to some of the world’s largest companies. However, these can be volatile and require a lot of research to understand. Alternatively, you can choose to invest in individual stocks, which are more specialised and allow you to focus on one particular company.

It’s also important to consider the time of year when determining whether to purchase or sell a stock. For example, summer months are typically weaker for the market and purchased stocks may lose value quickly. Additionally, year-end tax-loss selling may depress the price of a stock.