A common stock is the most basic kind of stock that is offered by public companies. Stocks allow investors to purchase partial ownership of a company. Common stocks make up the majority of stocks available on the market.
What is a common stock?
- A common stock is an investment that allows investors to purchase partial ownership of a public company.
- Common stock owners have voting rights on important company decisions.
- Common stocks make up the majority of stocks on the market, and they can be bought and sold on stock exchanges.
Common stock owners have voting rights on company issues like selecting directors or deciding corporate policies. If a company decides to pay out its profits as dividends, common stock owners receive cash based on the number of shares they own.
Investments in common stocks will generate returns if the stock’s price increases, but if a company goes bankrupt, creditors and preferred stockholders take precedence over the claims of common stockholders. If a company goes under, it is possible for common stock owners to lose their entire investment.