What Is a Stock?

A stock (also called a share) is a small piece of ownership in a company. If a company is divided into 1 million shares and you own one of them, you own one-millionth of that company.

Companies sell shares to raise money — to build products, hire people, or expand — without having to borrow it. In exchange, the people who buy those shares (shareholders) get a stake in how the company does from then on. Shares of large companies are bought and sold on stock exchanges, such as the New York Stock Exchange and the Nasdaq.

There are two main ways a stock can make money for its owner: the share price can rise, so it could be sold for more than was paid, and some companies pay out part of their profits to shareholders as dividends. Neither is guaranteed. Share prices can also fall, and it is possible to lose some or all of the money put into a stock.