A stock (also called an "equity" or "share") is a small piece of a company. Buy one, and you own a proportional slice of everything the company owns and everything it earns.
What a stock actually is
Legally, a stock is a claim on a company's assets and future profits. If a company has 100 million shares and you own 1, you own one hundred-millionth of the business. Small — but real. That share entitles you to a proportional vote at the annual meeting and a proportional slice of any dividends.
Why companies issue stock
- To raise money to grow — new factories, R&D, acquisitions.
- To give founders and early investors a way to sell their stake.
- To use shares as currency for acquisitions and employee compensation.
How you make money
- Capital appreciation — the share price rises above what you paid.
- Dividends — some companies pay out part of their earnings in cash each quarter.
- Buybacks — the company uses cash to buy its own shares, indirectly boosting your ownership percentage.
Common vs preferred
Most stocks you hear about are common stock — voting rights and residual claims on profit. Preferred stock is a hybrid: usually no vote, but a fixed dividend paid before common shareholders. Preferred behaves more like a bond than an equity.
The risks
Frequently asked questions
Do I actually own part of the company when I buy a share?
Yes — legally you're a fractional owner with a claim on the company's assets and profits. In practice, one share of a company with a billion shares outstanding gives you very little voting influence, but the ownership claim is real.
How do stock prices go up?
Over the long run, prices follow earnings and cash flow. In the short run, prices reflect changing expectations about the future — even great businesses can see their share price fall if expectations were higher.
Can a stock go to zero?
Yes. If a company goes bankrupt, shareholders are last in line after bondholders and typically receive nothing. This is one reason diversification matters.
Put this into practice
Open a real ticker, ask Auri your own questions, and track what you learn — all in one calm workspace.