Stocks, also known as shares or equities, represent ownership in a company. When you buy a stock, you become a partial owner of that company and are entitled to a share of its profits and assets. Stocks are one of the most popular and widely traded financial instruments in the world.
Companies issue stocks to raise capital for business expansion, research, or paying off debts. Investors can profit from stocks in two ways: through capital gains (selling the stock at a higher price than the purchase price) and through dividends (regular payments from the company's earnings).
For example, if you buy 10 shares of a company at $50 each and the stock price rises to $70, your investment has grown from $500 to $700. However, stock prices can also decline, leading to losses. Stocks are generally considered higher-risk investments compared to bonds, but they also offer higher potential returns over the long term.