A stock is a tradeable asset that holds monetary value. It represents ownership in a company and provides a means for investors to participate in the profits of that company if its business is successful. It also allows for growth through price appreciation and dividend payments.

Companies issue shares of stock to raise money to grow their businesses. When a company issues its shares on a public exchange, it becomes a publicly traded company and can be bought and sold by investors like you. This opens the company up to more regulations, but it also gives everyday people a chance to invest in that company and help drive its future success.

Investors can buy and sell stocks through a brokerage firm or an investment app, which will process the entire transaction electronically. When you make a trade, you tell your broker what you want to buy or sell and how many shares you want of the stock. The broker then relays your request to the exchange and a market maker handles the actual buying or selling of your shares for you. Market makers are there to ensure that a willing buyer and seller can always find each other on the stock market, even when they may not be actively looking to buy or sell.

While you may hear the terms stocks, equity, and ownership used interchangeably, they all mean the same thing: a claim on a company’s assets and earnings. Purchasing a share of a publicly-traded company’s stock grants you a proportional ownership stake in that company, which is sometimes called your equity stake. The more shares you own, the greater your ownership stake is in that company.

Ultimately, the reason most people invest in stocks is that they believe that a business will grow over time. The business’s ability to grow its sales and profits is the primary factor that drives its stock prices, so a growing company will see its stocks rise, while a shrinking company might see its stocks fall.

Stocks can be a great way to diversify your investment portfolio and potentially increase your retirement income over the long term, but they aren’t guaranteed to grow or even retain their value over a certain period of time. This is why investing in stocks typically works best as a long-term strategy and why it’s important to have a well-diversified portfolio of stocks in your overall investment plan.

When comparing returns, it’s important to look at the total return of the stock, which includes any dividend or interest payments you receive in addition to its price return. It’s also crucial to account for inflation when analyzing a stock’s performance.

One of the most useful tools when evaluating a stock is a chart, which shows how the price of a particular share has changed over a specific period of time. This can be a great tool for determining whether or not a stock is priced fairly. In addition, investors can access professional analyst reports to get in-depth insights into the underlying company and broader market trends.