Stock is the share of a company that an investor buys. These stocks give investors a chance to share in the success of a public company. Stocks can also increase in value. However, not all stock is created equal. Some stocks are issued with limited or no voting rights, while others have enhanced voting rights or have priority over other shares in the event of a liquidation.
Stocks have historically given investors a high rate of return, but they come with risk. Stock prices fluctuate for a number of reasons, including market volatility and company-specific events. While investing in just one stock can be risky, diversified portfolios can provide higher returns. To find a good balance between risk and return, learn about the different stock market sectors.
Companies can choose to list their shares on a public exchange or privately. In most cases, the exchange has strict regulations that help protect investors and benefit the economy. A company’s stock is deposited with a depository in electronic form, known as a Demat account. As shares are bought and sold, the price of each security fluctuates based on supply and demand.
Another option is to purchase stock options. This is the most common form of equity compensation. Stock options give an employee the right to buy the stock of the company at a pre-determined price. This price is called the exercise price or strike price. Options vest over a certain period of time, called the vesting period. After this time, the employee’s stock becomes his or her property.