What's a Stock?

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By Selena Maranjian (TMF Selena)
September 6, 2002

Q. What's a stock?

A. A share of stock represents actual ownership in a company. Consider this very simplified example: Imagine that Home Surgery Kits, Inc. (ticker: OUCHH) has 10,000 shares outstanding (i.e., in existence). If you own 100 shares of OUCHH, you own 1% of the company.

Ownership entitles you to share in the company's earnings. These are sometimes partially paid out to shareholders in the form of dividends. Instead of or in addition to dividends, earnings may also be reinvested into the company, to fuel growth and generate more value.

With most shares of common stock, along with ownership comes voting rights. That's right -- when your company has a big decision to make, it will ask you what you think. Individual investors typically buy "common stock" in a company. Another form of stock is "preferred," which usually carries some extra conditions and often excludes voting rights.

Learn more basics about stocks in our Investing Basics area. To learn about investing Foolishly, visit our Fool's School. Or check out some of our inexpensive and well-regarded online seminars (which feature money-back guarantees).

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This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.