When you buy stock, you become a part owner of the company that issues it. You don’t get a parking spot in the company lot or rub elbows with the corporate big wigs, but you do earn a share of the profits (and losses). That’s because stocks are based on supply and demand, which fluctuates depending on how profitable a company is.

In general, investors who hold a well-diversified portfolio of stocks over the long haul have seen solid returns. But stocks come with risks that can be significant. The value of a share can go up or down based on numerous factors, from earnings reports to overall economic conditions and geopolitics.

Stocks are traded on a public exchange, which is a licensed venue for buyers and sellers to meet to buy or sell securities. Most people invest in stocks through a brokerage firm, which is a specialized business that buys and sells shares on your behalf.

Investors can buy and sell shares of companies through an online stock-trading platform like TD Ameritrade, Schwab or Fidelity. Competition among these firms has reduced trading fees to near zero.

The value of a stock is determined by the profitability of a company, the demand for its products and services, and the economy. That’s why it’s important to diversify your portfolio by investing in stocks from a variety of industries and regions.

If a stock is highly profitable, its price will rise because more people want to buy it. But if a company is struggling or its industry is experiencing a downturn, its share price will fall because there’s less demand for it.

Some stocks pay dividends to their shareholders, which is a way of sharing some of the profits that the company has made. These payments are generally a portion of the company’s annual net earnings, although some companies may also distribute special dividends funded by retained earnings or asset sales. In general, stocks that pay dividends have outperformed those that don’t over time.

A company’s profit is measured by its revenue and its gross margin, which is the difference between what a company spends on operations and what it makes from those operations. Analysts often use these and other metrics to assess a company’s health, performance and growth potential.

Investors should regularly read quarterly reports from a company to stay abreast of news about the company and its business. But don’t be swayed by headlines. The most successful investors stick with their investments over the long haul and avoid selling in panic or on good or bad news. A financial advisor can help you create a strategy that is aligned with your investment goals and risk tolerance.