Financial Literacy

A share of stock is partial ownership in a company. Depending on the number of shares you purchase will determine your ownership percentage. Most often individual investors own a fractional percentage of any one company. Companies that offer stock for sale to the public are known as publicly-held companies.

There are different types of stock. Common stock is what people normally think of when they hear the word "stock." It is by far the most widely available kind of ownership. Preferred stock has certain protections against a company's financial troubles but tends to grow more slowly in value. A corporation may also have classes of stock with different dividend policies, purposes or restrictions.

Many stocks pay dividends based on the profits of the company. These will generally fluctuate from year to year. Blue-chip companies pay the most stable dividends. Stocks with stable, high dividends are called income stocks. These are generally older, established companies. Young, growing companies may not pay any dividends at all. Instead, they will put earnings back into the company to make it grow faster. These stocks are called growth or aggressive growth stocks.

To purchase individual stocks, you typically need to open a brokerage account. Full service brokers typically charge commissions but they may provide you with more research and information, and could be appropriate for investors who desire professional assistance. Discount brokers charge you less, but you need to know what stock you want to buy or sell; they generally do not offer investment advice.