Stocks, company shares, equities — call them what you will, they’re an important part of many investors’ plans to build wealth. But they’re not always easy to understand. In this article, we’ll take a look at the basics of stocks and how different types differ from one another.

Stocks, which represent partial ownership of a corporation, are sold and bought through brokerage accounts. Companies raise money by selling their shares, and that capital can then be used for any number of purposes, including paying off debt, investing in growth, or simply funding ongoing operations. The value of a stock rises or falls, depending on a number of factors, including how well a company is performing and what the market thinks about its future prospects.

The stock market is the place where people buy and sell stocks, and it’s a very fast-moving environment. Companies sell their shares to the public through an initial public offering (IPO), and then the stock is traded among investors. People may purchase or sell their own shares, but they can also invest in mutual funds or exchange-traded funds that hold a variety of stocks.

Investors want to make sure that the stock they buy is at a fair price, and that’s why there are so many ways to evaluate stocks. A big part of the puzzle involves understanding a company’s financial health, which includes reviewing its annual reports and listening to earnings calls for guidance on where it is headed. In addition, it’s important to understand the industry in which a company operates; different industries have their own benchmarks that can be useful for valuing companies.

While there are several methods for evaluating companies, valuation ratios are typically considered to be some of the most useful tools for stock analysis. These ratios are designed to compare the value of a company with other companies in its sector, and can help an investor determine whether a particular company’s stock is under- or overvalued.

Buying and selling stocks isn’t something that happens just once a day; it’s an ongoing process throughout the trading day. That constant flow of activity can influence stock prices in both positive and negative ways, depending on what people are thinking about the future prospects of a company, or what news might be affecting the industry as a whole. As a result, picking individual stocks can be challenging, but by asking the right questions and leveraging some tried-and-true methodologies for analyzing stock, investors can have a better chance of building wealth over the long term.