When you purchase shares in a company, it’s as though your money buys a little slice of the company. In some cases, owning stock allows you to vote on company decisions, or it might give you a share of the company’s profits (known as dividends). There are a number of different ways to value stocks, and learning about these methods can help you find under- or overvalued investments.

A stock’s price is determined by supply and demand on stock exchanges, and it can also be influenced by the market in general. For example, a company may have an excellent balance sheet and solid financials, but if investors start to panic and sell their stock holdings, that can cause the company’s stock prices to plummet.

Stocks are one of the most common types of investment vehicles, and there are many advantages to investing in them. They typically provide more growth potential than other forms of investment, and a well-diversified stock portfolio can play an important role in reaching your long-term financial goals.

You can purchase individual stocks by opening an account with a broker and telling them how much you want to invest. When you choose a stock, its ticker symbol is entered into your broker’s computer system, and the broker then purchases the stock on your behalf. Alternatively, you can open a retirement account that is specifically designed for investments in stocks and mutual funds, and the brokerage will handle all transactions for you.

Many companies are listed on multiple stock exchanges in order to raise capital and reach a wider investor base. For instance, some large non-U.S. companies list on the U.S. exchange as well as in their home country in order to attract more investors. To do so, these companies deposit a block of their shares at a bank in the United States that creates American depositary receipts, or ADRs, for each share trader purchases.

In addition to the factors that influence stock prices in the broader market, stocks can be impacted by seasonal trends within sectors. For instance, companies that make travel-related products tend to see a rise and fall in demand during certain times of the year. Similarly, some manufacturers might produce more goods during the summer in anticipation of increased consumer demand for school-related products and other goods that are consumed in the fall.

While a stock’s performance may look great when compared to the overall market, it’s important to consider how it’s faring versus its primary competitors and industry peers as well. This helps you evaluate how it fits into your overall investment strategy, which can have an impact on your bottom line. To do this, you can compare the stock against a benchmark, such as an index or a sector benchmark. This can help you determine how a stock has performed in comparison to other investments and whether it is delivering the returns that you need for your portfolio.