What Is a Stock — The Complete Beginner's Guide
Stocks are the foundation of modern investing. Here's exactly what owning a stock means, where stocks trade, and what determines their price.
Basics · June 29, 2026 · 4 min read
A stock (also called a share or equity) represents a unit of ownership in a company. When you buy one share of Apple, you own a tiny fraction of Apple Inc. — including a proportional claim on its assets and future earnings. Companies issue stock to raise capital: rather than taking out a loan, they sell ownership stakes to investors. The first time a company sells shares publicly is called an IPO (Initial Public Offering). After that, shares trade between investors on stock exchanges.
Where Stocks Trade
Stocks trade on stock exchanges — regulated marketplaces where buyers and sellers meet electronically. The two largest US exchanges are the NYSE (New York Stock Exchange) and the Nasdaq. Companies must meet strict financial and governance requirements to be listed on these exchanges. Most stock trading today happens electronically within milliseconds, with computers matching buy and sell orders from millions of participants worldwide. The exchange ensures orderly markets and sets rules about how trading must occur.
What Makes Stock Prices Move?
Stock prices are determined by supply and demand. When more people want to buy a stock than sell it, the price rises. When more want to sell than buy, the price falls. The fundamental driver of this supply and demand is expectations about the company's future earnings. If investors believe a company will earn significantly more in the future than they currently expect, they bid the price up today. If expectations deteriorate — due to poor earnings, a bad CEO decision, or an industry downturn — sellers outnumber buyers and the price falls.
Common vs. Preferred Stock
Most stocks that retail investors buy are common stock — which gives voting rights at shareholder meetings and a claim on profits (often through dividends). Preferred stock is a hybrid between stock and bonds: preferred shareholders receive fixed dividend payments before common shareholders and have a higher claim on assets in bankruptcy, but typically do not have voting rights. For most retail traders, common stock is the only relevant type — preferred stock is primarily used by institutional investors and in private company financing.
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