What is a stock?

Views 514KAug 9, 2023

Core points

The stock represents the investor's ownership of the enterprise.

By buying stocks, you can share the profits of the growth of the enterprise.

The basic characteristics of stocks include non-reimbursability, profitability, liquidity, price volatility and participation.

Detailed explanation of concept

Stock is the share certificate issued by a joint-stock company to the investor when raising capital. Every stock you buy represents your ownership of a basic unit of the business.

This ownership means that investors who buy shares can share the profits brought about by the growth of the business. There are two ways for investors to make a profit, one is that with the growth of enterprise value, the stock price continues to rise, investors can earn the bid-ask spread. The second is that some companies with excellent cash flow will pay dividends on a regular basis, and investors can also get cash gains in the form of dividends.

It is important to note, however, that not all companies are good enough, and they may suffer losses if they accidentally buy a company that is in decline.

The basic characteristics of stocks

Non-reimbursability. After the investor subscribes for the stock, it cannot be returned to the company, but can only be sold to other investors in the market.

Profitability. By virtue of the shares held, shareholders are entitled to receive dividends or dividends from the company, depending on the company's profitability and dividend policy.

Liquidity. The shares of listed companies can be bought, sold and circulated freely through the stock exchange. Common stock exchanges include Shenzhen Stock Exchange and Shanghai Stock Exchange in China, and Hong Kong Stock Exchange, New York Stock Exchange and NASDAQ Stock Exchange outside China.

Price volatility. The price of the stock will fluctuate up and down, bringing uncertainty and risk. After buying the stock, it may not only make a profit, but also suffer a loss.

Participation. Shareholders have the right to attend shareholders' meetings, exercise their voting rights in proportion to their shareholdings, and participate in major decisions of the company.

Disclaimer: The above content does not constitute any act of financial product marketing, investment offer, or financial advice. Before making any investment decision, investors should consider the risk factors related to investment products based on their own circumstances and consult professional investment advisors where necessary.