Stock Basics

When you buy stock in a company, you buy part ownership in that company. As a shareholder or stockholder, you benefit from certain privileges that come with ownership. You may also prosper from the company's success, through dividend income or by selling your stock once it has increased in price.

However, while a stock price can increase indefinitely, it can also decrease. Owning a piece of the company also means you may lose some or all of your initial investment if the company does poorly and its share price drops.

Over time, share prices in companies fluctuate in response to changing conditions in the economy and investor sentiment. As a result, many regard stocks as a risky investment. Yet, historically, stocks have achieved more impressive returns over the long term than any other traditional investment category. Learning the techniques of trading and the factors that affect stock performance can help you invest with confidence.