What Is a Stock?
A share of stock is a small piece of ownership in a company. What owning one means, how shareholders make or lose money, and what a share price reflects.
In one sentence
Stock. A share of ownership in a company. Also called a share or equity.
What you own
A company's ownership is divided into shares. Owning some makes you a part-owner, with a claim on a slice of its future profits. You don't own its buildings or bank accounts directly, and you aren't responsible for its debts: when you buy a stock, the most you can lose is the amount you invested.1
| Shares the company has issued | 50,000,000 |
|---|---|
| Shares you own | 500 |
| Your stake | 500 ÷ 50,000,000 = 0.001% |
| Company's profit this year | $100 million |
| Profit per share | $2.00 |
| Your share of the profit | 500 × $2.00 = $1,000 |
That $1,000 isn't sent to you. The company may pay part of it as a dividend and keep the rest to reinvest, which you own a slice of too.
How shareholders make money
There are two ways: Dividend. A payment a company makes to its shareholders, usually in cash, out of its profits. Dividends are decided by the company's board and aren't guaranteed. More on this term, cash paid out of profits, and a rise in the share price, which you collect when you sell. Neither is promised. A company can cut its dividend, and a share price can fall as well as rise.
What the price reflects
A share price is set by trading between buyers and sellers. In principle it reflects what investors expect the company to earn in the future, but from day to day it also moves with news, interest rates, and mood, as Why Prices Move explains.
Learn it properly
- What Is Investing?Part 1: Foundations · Free
- What a Stock IsPart 2: What You Can Own · Free
Notes and sources
- Investor.gov, U.S. Securities and Exchange Commission. Investor Bulletin: An Introduction to Short Sales. Checked 2026-09-26. Back to text