Common Stock

As its name suggests, most stock issued in the United States is common stock. Common stock represents ownership in the company, and as such, you are entitled to vote for major policy and management decisions as well as for its board of directors. Your rights are proportional to the number of shares you own.

The board of directors may choose to issue dividends, or a portion of its income, to the company's shareholders when the company does well. While some companies may choose to offer dividends, others may choose not to. For example, stock in high growth companies may be less likely to offer a dividend as they may instead decide to reinvestment those funds back into the company to help sustain their high growth rates.

Dividends are not a sure thing. Most dividend-paying companies pay out dividends on a regular schedule, but they have the ability to stop paying them at any time. This action often has a negative impact on the share price.

As an owner of the company, you have the right to sell your shares. The difference between the price at which you buy the stock and the price at which you sell it is your profit or loss. If you make a profit, you are said to have realized a capital gain. The period of time that you hold your position may determine if it is a long-term gain (held longer than one year) or a short-term gain (held less than one year) and may affect the rate at which the gain is taxed.