Stock

A stock is a small piece of ownership in a company. Buy one share and you own a fraction of that business; as the company grows, so does the value of your piece. Unlike a bond, you are not lending — you are an owner.

Shareholders can make money two ways: selling for more than they paid, and receiving dividends when the company distributes profit. Ownership also carries voting rights at shareholder meetings.

Share prices are not set by results alone. Interest rates, exchange rates, the economy and plain human expectation all move them. Strong results can still send a stock down if they miss expectations, and a loss-making company can rise if the future looks bright.

Over long periods stocks have returned more than deposits or bonds, and the price of that is volatility. If a company fails, the investment can go to zero. That is why spreading across many holdings rather than concentrating in one is the basic rule.