Stock, company shares, equities — these investments go by many names, and they’re part of most people’s long-term financial plans. But they can be confusing. To make the most of your investment, learn about what stocks are, how they work and what you should know about different types.

The stock market is a global network that allows anyone to buy and sell fractional ownership in companies. It’s a way to diversify your holdings and grow your money over time, ideally outpacing inflation.

A stock’s value is determined by supply and demand. The amount of a share available to purchase at any given moment is called the float, and the demand is based on investors’ expectations about future returns on that stock. When demand is greater than the float, the price of the stock goes up. When the number of shares on offer is low, the price of the stock goes down. The stock exchanges that trade shares determine these prices in a process called market making, which involves matching buyers and sellers at any given moment. This system works best when there are lots of willing buyers and sellers at sequentially higher or lower prices, which is called liquidity.

When a company’s stock price rises, shareholders make money by selling their shares at the higher price. They may also be able to earn dividends when the company distributes earnings, or reinvest those earnings back into the business to generate additional growth and profits. Some companies choose to reinvest all of their profits rather than pay dividends. Regardless of their approach, all companies must balance the needs of shareholders with the company’s ability to meet its growth and profitability goals.

You can buy and sell stock in a variety of ways, including through brokerage accounts and investment apps. The type of stock you purchase depends on your financial goals and risk tolerance. Public stock is the kind you’re most likely familiar with; it’s the type that’s commonly traded on major markets like the New York Stock Exchange and Nasdaq, and is often covered in the news. Private stock is stock that’s not publicly traded, and it can be difficult to find and buy.

Stock can have a volatile price, so you should always keep your investing goals and risk tolerance in mind when choosing a specific stock. You can diversify your portfolio by buying different stocks, such as common stock, preferred stock and convertible securities. You can also invest in ESG stock, which represents companies committed to environmental, social and governance principles. This can be an attractive option if you want to reduce the impact of your investments on the planet. But be aware that ESG stock is typically less liquid and may have more limited returns than other stock investments.