A type of security that signifies ownership in a corporation and
represents a claim on part of the corporation's assets and
earnings.
There are two main types of stock: common and preferred. Common
stock usually entitles the owner the right to vote at shareholder
meetings and to receive dividends that the company has declared.
Preferred stock generally does not have voting rights, but has a
higher claim on assets and earnings than the common shares. For
example, owners of preferred stock receive dividends before common
shareholders and have priority in the event a company goes
bankrupt and is liquidated.
Also known as shares, or equity.
Notes:
A holder of stock (a shareholder) has a claim on a part of the
corporation's assets and earnings. In other words, a shareholder
is an owner of a company. Ownership is determined by the number of
shares a person owns relative to the number of outstanding shares.
For example, if a company has 1000 shares of stock outstanding,
and one person owns 100 shares, that person would own and have
claim to 10% of the company's assets.
Stocks are the foundation of nearly every portfolio, and they have
historically outperformed most all other investments over the long
run.
