The value of stocks, the shares in a corporation that represent ownership, rises or falls with the success or failure of the company that issues them. A stock’s price is determined by many factors, both internal and external. If you’re considering investing in a particular company, it’s worth taking time to understand the fundamentals behind that stock. This can help you determine whether or not its stock is worth the investment and what the company might be able to achieve over time.

A stock is a share in the capital of a public corporation. Each stock represents partial ownership in that corporation, and gives its holder the right to vote at shareholders’ meetings and receive dividends. It also allows the holder to claim a portion of the company’s assets and earnings in the event of bankruptcy, but ranks below bonds (and other debt instruments) in terms of priority for repayment. There are thousands of companies whose stocks trade publicly, and their prices fluctuate every trading day.

In the longer term, a stock’s price is determined by many internal factors: its ability to make money with its products or services, its current profitability, the quality of its management and leadership, and the strength of its competition in the marketplace. In addition, the economic environment influences almost all companies to some degree, so the stock market as a whole must be considered when evaluating a particular business’s prospects.

Over shorter periods, the value of a stock is influenced by external factors, such as interest rates, crude oil prices, market cycles (recessions and growth phases), jobs growth, inflation and consumer confidence. A company’s ability to thrive in these conditions may be reflected in the price of its stock, and it’s worth considering when analyzing a potential investment.

Investor demand for a specific stock often influences its price, since the more people who want to buy it, the higher its market price. This is particularly true if investors expect the company to grow in future years, or if they think it has a unique advantage that will allow it to weather economic turmoil more effectively than competitors.

There are a number of ways to invest in stocks, including through your employer’s retirement plan or other mutual funds. You can also open an individual retirement account or brokerage account to start investing on your own, and you can select the specific stocks in which to invest by researching them individually. To make the most of your investments, it’s important to have clear goals and a solid strategy, as well as to only risk what you can afford to lose. You’ll also need to be in a good financial position, free of high-interest debt and with enough cash set aside for a rainy day. For further guidance, check out our article on How to Start Investing.