What are Stocks?

Stocks, or shares of stock, are the pieces of corporations that are bought and sold for ownership. Stocks do not have to be listed on the major exchanges, such as the NASDAQ or New York Stock Exchange to be considered stocks or shares. Every corporation is comprised of many different shares of stock; even private corporations have stock to decide who has the most voting power and to assign certain ownership rights to different people.

Stocks for Investors

For the typical investor, the shares of stock that are bought on the major markets are the most discussed shares of stock. Without knowing the operator or the board of a corporation, it's possible to buy a small portion of the largest companies in the world. At any time, it is possible for an investor with any amount of money to buy a position in companies like McDonalds, WalMart, Microsoft or any of the biggest companies in the world. There is not just one owner for each company; there are thousands, possibly millions or even billions of investors, all with an interest in just one company through various vehicles, including brokerages accounts and mutual funds. Whether you know it or not, each dollar you spend at WalMart may ultimately come back in the form of dividends or higher stock prices.

How Stocks Work

Stocks are priced per share and are noted by stock quotes. Buying a share of stock entitles you to ownership of the company, but no obligation to its debts. Buying a stock on the NASDAQ or through a 401k is like buying a piece of a huge pie; you're able to profit with the company and build wealth as the company grows.

What are Voting Rights?

When it comes to decision time, it,s important to know your right to vote as a shareholder of a corporation. Certain shares will be given different voting rights. Many times, a corporation will sell both common and preferred stock and list class A and class B shares. Often, the class B shares are held by insiders and carry more voting rights; this way, the founding members and board members are given a greater right to vote. Stock prices do not dictate the power of your voting rights. Many times, class A and class B shares can have the same value, with one type carrying ten times more voting power. Watching the stock news will tell you when it's time to vote, and the corporation will let you know how you should submit your vote. Many investors opt to turn their voting power to someone else, called proxy votes. When buying into a mutual fund, your votes will be instead turned over to the manager, who will make votes on behalf of the fund. Many times, in the media and on stock news channels, you'll hear of proxy wars, where leaders co-op with other owners to push an important decision either on acquisitions or on things as trivial as where the headquarters will be placed.