Investment Education Center > Investing 101

What is a Stock?

A stock represents partial ownership of a corporation. When you buy shares of a stock, you effectively own a small fraction of that company. Stocks of public companies are traded on stock exchanges like the NYSE or the NASDAQ.

Owning a stock entitles you to share in the future profits of the company. The value of a company is essentially the value of its future cash flows. So the value of a stock is the value of a fraction of the future cash flows of the company.

Some companies pay out part of their profits through dividends. You can also benefit from a price increase of the company stock.

Buying stocks is a risky investment, as neither dividends not price increases are certain and the stock can even lose part or all of its value.

Investing Glossary

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"real rate of return"

The percentage of return on an investment over one year after adjustments for inflation or deflation continue reading

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