A stock is a share of ownership in a company. When you buy one, you own a sliver of everything the business owns and earns, and you get a vote on major corporate decisions.
Prices move with supply and demand, driven by expectations of future profits. Strong earnings growth tends to lift a stock over time, while disappointments, rate hikes, and economic slowdowns weigh on it.
Shareholders are paid two ways: through price appreciation and, in many cases, dividends, which are portions of profit distributed regularly. Over long periods, stocks have historically delivered the highest returns of the major asset classes, with the most volatility along the way.
Key takeaways
- A stock is fractional ownership in a company
- Prices follow expectations of future earnings
- Returns come from price gains plus dividends
