What is a stock?
A stock represents an ownership interest in a company. Owning shares does not guarantee profit or a dividend.
Ownership rights
1. Shares and voting Shareholders own equity interests. Voting and information rights vary with share class and applicable law. 2. Dividends A company may distribute part of profits, but a dividend amount or regular payment is not guaranteed. 3. Market price Orders, earnings, expectations and wider conditions affect price. Last traded price is not a guaranteed fundamental value. 4. Loss risk A share can fall below purchase price or become worthless. Equity holders generally rank behind creditors.
Value and risk
5. Face versus market value Nominal share value differs from trading price. Price times shares outstanding gives market capitalization. 6. Research Read financial statements, disclosures and risks. Past performance does not ensure future gains. 7. Being an owner Revenue growth can coexist with falling margins or weak cash flow. Review reports and disclosures as well as price history.