Glossary
Stock
A stock is a share of ownership in a company, entitling its holder to a proportional claim on the company's profits and assets.
Shareholders make money two ways: dividends paid from profits, and appreciation if the business grows more valuable. Stocks sit last in line if a company fails — behind lenders and bondholders — which is why they carry more risk than bonds and have historically demanded and delivered higher long-run returns in exchange.
Why it matters in practice
Stocks are the primary engine of long-term wealth growth in most portfolios, and the primary source of their volatility; over long horizons broad stock portfolios have outpaced inflation and bonds, while over short ones they can fall severely. The practical distinction is between owning individual stocks — where a single company's failure is a permanent loss — and owning thousands through funds, where no single failure matters much.
Related terms: Bond · Dividend · Index Fund · Market Capitalization · Volatility