A stock is an investment that represents a fraction of ownership in a company. When you purchase a company’s stock, you are buying a piece of the company called a share. Stock shares can be bought and sold. Ideally a company’s stock will increase in value and the shares can be sold at a profit. Companies initially use stock to raise money to pay off debts, grow the company, or create new products.
Being a stockholder can have benefits such as being paid based on the company’s earnings over a specific amount of time. There may also be drawbacks, such as if they company decreases in value, or goes out of business entirely (and investors lose some or all of their investment).
Stocks can be bought and sold though a stock market exchange such as the Nasdaq or the New York Stock Exchange.