Welcome to the world of investing! At its core, a stock is a security that represents a share of ownership in a corporation. When you buy a company's stock, you're not just holding a piece of paper; you are becoming a part-owner of that business. This entitles you to a portion of the company's assets and profits, proportional to the amount of stock you own. Why do companies issue stock? The primary reason is to raise money, or "capital." This capital can be used for various purposes, such as funding research and development, launching new products, expanding into new markets, building new facilities, or paying off debt. Selling stock allows companies to raise funds without having to borrow money and pay interest. This process of a private company selling shares to the public for the first time is called an Initial Public Offering (IPO). There are two main types of stock: common and preferred. Common stock typically gives shareholders voting rights, allowing them to have a say in corporate decisions like electing the board of directors. Preferred stockholders generally do not have voting rights, but they have a higher claim on the company's assets and earnings. This means if a company pays dividends, preferred shareholders get paid first. If the company goes bankrupt and liquidates, they also get paid before common shareholders. As a shareholder, your potential for profit comes in two main forms. First, if the company you've invested in grows and becomes more profitable, the value of your stock may increase. You can then sell your shares for more than you paid for them, resulting in a "capital gain." Second, some companies distribute a portion of their profits to shareholders in the form of "dividends." These are typically paid quarterly and can provide a steady stream of income. However, being a shareholder also comes with risks. If the company performs poorly, the value of your stock can decrease, and you could lose your entire investment. The company is not obligated to pay you back the price you paid for the shares. This is why research and understanding your risk tolerance are crucial before you begin investing.