Stock basics

Last major update: 05/25/08

Introduction
A stock share (also known as an equity share) represents ownership in a corporation.

The two familiar types of stock shares are "common stock" and "preferred stock." Owners of common stock have voting rights to elect board members of the corporation. Preferred stock typically has no voting rights but is legally entitled to dividends before other shareholders. Holding common stock in a corporation allows a shareholder the right to receive dividends from the company, and gives the shareholder a right to the company's assets during bankruptcy liquidation, though not before all creditors have been paid first. Holding stock may result in capital appreciation, as the demand for the stock goes up as the company grows its profits.

Buying and Selling
Purchasing individual stock may be done through either direct investment with the company (through a dividend reinvestment plan, for example), or through a brokerage account. Buying and selling through a brokerage account usually involves a commission paid to the broker. Many discount brokerages offer commissions under $20, and some even offer free commissions for certain situations. Full service brokerages can charge anywhere from $50 to $200 a trade depending on their rates, the number of shares purchased, and how often the stock is traded.