Stocks are financial instruments that represent partial ownership of a public company (also known as equities or shares). Investing in stocks is a way for individuals to buy an ownership share in a company and gain a stake in future prospects.
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This article provides a brief overview of what stocks are and the most relevant information about the instrument. If you want a more comprehensive understanding of stocks, please visit our learning page about stocks. |
The stock market
The marketplace where stocks are traded is known as the stock market, facilitating exchanges between buyers and sellers. Investors can purchase stocks directly from other shareholders, not from the company itself, within the secondary market, following a company's initial public offering (IPO).
Types of stocks
Different types of stocks include common and preferred stocks, distinguished mainly by their voting rights and dividend priorities. Stocks can also be categorized by market capitalisation (market value of shares)—small-cap, mid-cap, and large-cap—each with distinct growth prospects and volatility levels.
Additionally, stocks can be divided into categories like blue-chip, value, dividend, growth, penny, cyclical, and non-cyclical stocks etc. These categories can help investors understand the size, risk, and potential of an investment in a given stock. For example, value stocks tend to be less volatile than growth stocks.
Dividends
Some companies pay out a part of their profits to their shareholders, known as dividends. Dividends can be distributed one or more times per year, and the amount varies depending on the company and its profit in a given year. Dividends can be distributed as cash or additional shares.
Dividends provide a way for companies to share their profits with shareholders and can be an indicator of a company's financial health and profitability.
For a more detailed exploration of stocks and stock investing, please follow the comprehensive guide linked above.