What Are Stocks?

Written by True Tamplin, BSc, CEPF®

Reviewed by Editorial Team

Updated on March 08, 2023

Stock Meaning

Stocks, also known as equity, are a security representing a holder's proportionate ownership of a corporation.

Stockholders are therefore entitled to that portion of the corporation's assets and earnings.

Companies issue stock in order to raise capital to finance future growth.

Types of Stock

There are two types of stocks: common and preferred stock.

1.) Common Stock comes with the ability to cast votes at shareholder meetings and the right to receive dividends.

2.) Preferred Stock doesn't come with the right to vote, but does come with the right to receive dividends prior to common stockholders and higher priority in getting paid back if the company goes bankrupt and is liquidated.

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What is a Stock?

Stocks are primarily bought and sold on stock exchanges, such as the New York Stock Exchange (or NYSE), but can be traded privately as well.

Although the bond market is larger than the stock market, the stock market receives more press.

Historically, stocks have had a higher return than other types of investments over time.

The trade of stock is regulated by the Securities Exchange Commission, or SEC, in order to protect investors by maintaining a fair and orderly functioning of the securities markets.

Stocks FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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