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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.
A debt security paying a set amount of interest on a regular basis. Investors make loans to issuers such as corporations or the government in return for the interest. Issuers also promise to pay back the loan to the lender. continue reading
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