stock (share)

Imagine a company is cut into a million equal slices. If you own one slice, you own one-millionth of the whole business — its buildings, its brand, and its future profits. That slice is a share, and the collection of a company's shares is its stock. To buy stock is to become a part-owner of a company, however tiny your stake.

Ownership comes with two kinds of payoff. First, a profitable company may pay out part of its earnings to shareholders as a dividend — your slice of the profit. Second, if the company prospers and others want to own it, the price of your share can rise, giving you a capital gain when you sell. Owning shares usually also brings voting rights at the company's meetings. Unlike a bondholder, a shareholder is not promised anything: there is no fixed payment and no return of a set amount. If the company thrives, the upside is unlimited; if it fails, shareholders are last in line and can lose everything — though, thanks to limited liability, never more than they put in.

Stocks let companies raise money to grow without taking on debt, and let ordinary savers own a piece of the economy's productive capacity and share in its long-run growth. Over long periods, a broad basket of shares has historically out-returned bonds, which is the reward for bearing more risk. But that average hides a wild ride: stock prices swing daily on news, mood, and speculation, individual companies can collapse, and 'the market always goes up' is true only over the very long run and only for diversified holdings, never guaranteed for any single stock.