What is a stock?

A plain-English explanation of what a stock is, how owning shares works, how stock prices are set, and how shareholders make money.

Owning part of a business

A stock, or share, is a small piece of ownership in a company. If a company has 1 billion shares and you own 1,000, you own one millionth of it: a matching slice of its profits, assets and future. See Stocks as ownership, not symbols.

Why companies sell shares

Companies sell shares to raise money to grow, usually through an IPO. After that, shares trade between investors on exchanges; the company is not involved in each trade.

How prices are set

The price is whatever buyers and sellers agree on at that moment. Over the short run it moves with news and emotion; over years it tends to follow the company's earnings.

How you make money

  1. Price growth: the company grows, earns more, and its shares become worth more.
  2. Dividends: some companies pay part of their profits to shareholders in cash.

Risks

A company can shrink or fail, and its shares can fall to zero. That is why most investors own many companies, often through an index fund. See How many stocks should you own?.

Questions

Can you lose more than you invest in a stock?

Not when you simply buy shares. The most you can lose is what you paid. Borrowing on margin or short selling can lose more.

How much money do I need to start?

Many brokers let you buy fractional shares for as little as a dollar.

See also

  • Stocks as ownership, not symbols A share is a slice of a real business. Thinking like an owner explains why long-term prices follow revenue, earnings and margins, not headlines.
  • What is an ETF? What an exchange-traded fund is, how ETFs differ from mutual funds and single stocks, the main types of ETF, and what to check before buying one.
  • Market capitalization Market cap is the total value of a company's shares. The size categories, how market cap compares with enterprise value, and market cap versus potential.
  • Investor or trader The difference between investing and trading, why most individuals do better as long-term owners, and how costs, taxes and time favour patience.

Pages that link here: Building your investing knowledge, Investing FAQ

Last updated September 30, 2026. Education only, not investment advice.