A stock is a share in the ownership of a company, including a claim on its earnings and assets. Shares are bought and sold through a stock exchange, like the New York Stock Exchange or the National Association of Securities Dealers (NASDAQ). Investors buy stocks as part of a portfolio to earn money from capital appreciation – the value of the shares going up over time.

When companies want to raise money, they issue stock, which are purchased by investors on the public market. These stocks are then traded, rising or falling in price based on the fortunes of the underlying businesses. The success or failure of a business has the biggest impact on the stock, but other factors like general economic conditions and market fluctuations can also influence a stock’s price.

The value of a stock can also increase over the course of a trading day or week based on the news, both good and bad, that comes out about it. For example, a positive earnings report for a large company can drive its stock price up, as the potential for increased revenue and profits boosts confidence in the company. Conversely, a negative earnings report can send stocks lower as investors weigh the implications of the poor results.

Most people are familiar with the concept of a stock, but many don’t fully understand how they work or how to best incorporate them into an overall investment strategy. The most important thing to remember is that a stock is a small piece of the ownership of a company. Purchasing a stock does not give you any real-world benefits, such as a parking spot in the company lot or the right to rub shoulders with company bigwigs. In fact, most people who hold a stock do so because they hope that the value of the company will rise over time.

While it’s true that some companies, such as Walmart and Microsoft, have earned early shareholders many times their original investments, this doesn’t mean that all stocks will perform the same way. A successful company’s stocks will still experience short-term volatility – and in some cases, the value of its shares may even go down if it suffers from a financial crisis or a competitor releases a similar product.

There are several reasons to sell a stock, such as wanting to cut losses or needing to rebalance a portfolio with another asset class. However, selling just because a stock has increased in price isn’t an ideal long-term investment practice, as it could mean that you miss out on future gains from the stock. Instead, a better approach is to set a dollar target that you want to reach, such as $30 per share, and then simply wait for the opportunity to present itself. You can also use a stop loss order, which will automatically sell your stock when it reaches a predetermined price. This is a popular option with online brokers, such as E-Trade and Schwab.