Stock represents ownership stakes in companies that can be bought and sold. As a result, stockholders can gain wealth through the appreciation of the company’s shares or by receiving dividends from its earnings. Most people invest in stocks as a way to earn long-term returns on their capital that exceed those from other asset classes like bonds and real estate.

There are two main types of stocks: common and preferred. As the name suggests, common stock represents proportional ownership of a company and provides voting rights to its shareholders. Preferred stock generally doesn’t have the same rights as common stock, but it does often carry a higher yield than common stock and is less volatile. Both share types can be found on public stock markets, which are regulated by governments and financial institutions to prevent fraud, protect investors, and benefit the economy as a whole.

Individuals typically buy and sell stocks through stock exchanges, such as the NYSE or Nasdaq. These stock markets are a global network of trading platforms where securities are traded by professional investors or individual traders. Individual investors can open brokerage accounts to purchase and sell shares of their choosing.

The value of a stock is determined by market demand and supply. When demand increases while the number of shares stays constant, a stock’s price will rise. Conversely, if demand decreases and the number of shares in circulation remains unchanged, the stock’s price will fall. This is how stocks gain and lose value, and it’s one of the primary reasons why it’s important for investors to understand how to properly value a stock.

A stock’s price can be influenced by a number of factors, including company news releases and analyst reports. It’s also helpful for investors to compare a company’s stock against a benchmark, such as the market or sector index. This will give them a sense of whether a particular stock is under- or overvalued.

Ultimately, the most important thing to know about stock is that it’s a vehicle for building wealth over time. However, it’s also important to remember that stocks are risky investments. In some cases, the stock market can decline over a period of years, and that’s why it’s important to have a well-diversified portfolio.

A well-diversified portfolio will include a mix of stocks, bonds, and cash to provide a diversified investment experience. Investors can also diversify their portfolio by investing in different sectors and countries. There are many benefits of investing in foreign stocks, including lower costs and increased access to international growth opportunities. However, it’s important to research each country and sector before making an investment.