A share of stock represents a part ownership stake in a company. As a shareholder, you have rights to a proportion of the company’s profits, which are the foundation of a stock’s value. Investors can also earn returns on their shares from dividend payments or appreciation in the price of a stock’s value on the market, or both. Some stocks can even come with voting rights and other benefits.

The stock market is a dynamic environment, with a variety of buyers and sellers at all times. Individual retail investors, investment banks and brokers working on behalf of clients, institutions like pension funds and insurance companies, exchange-traded funds, mutual funds and hedge funds, investor groups and even publicly traded corporations trading in their own shares are all major participants. Additionally, robo-advisors that automate investments for individuals are increasingly popular.

While nothing is guaranteed with investing, stocks have historically outperformed other asset classes, such as bonds and gold, over the long term. However, stocks come with risk and can fluctuate in value, so it’s important to take the time to understand a company before purchasing its shares.

The most basic reason for buying a share of stock is the hope that the company will grow and its stock’s value will increase in response. This can be accomplished in two ways: by growing revenues and earnings, or by expanding into new markets or making strategic acquisitions. A company’s performance is reflected in the stock price, which rises or falls based on the expectations of investors and analysts.

Companies often offer dividends to shareholders from their earnings, which are paid out on a regular basis. Some companies choose to reinvest their profits instead of paying out dividends, which also increases the company’s value. This retained earning is a key component of the stock’s value, and it can be a great way for shareholders to make money.

Investors can also earn returns from a stock’s appreciation in price on the market, or when they sell it for more than they bought it for. This type of return is called capital gains. The price of a stock can rise or fall, depending on market dynamics and the performance of other companies in the industry, as well as general economic conditions.

As a general rule, large company stocks as a group have outperformed other types of assets in the past, but you should never invest all your money in stocks because it is possible to lose your entire investment, especially over the short term. To get started, talk to your Civic Credit Union financial advisor about how stocks might fit into your overall portfolio and investment goals.