Everything to know about stocks

What is a stock? A stock is an actual share in the ownership of a business. If you buy 10 shares of a company whose ownership is divided into 1,000 shares, then you are the owner of 1 per cent of the company. Since your share is tiny, you don't have any say about the company's operations. But you can gain financially from your ownership. A share entitles the shareholder to a proportionate share in the residual profits of a business enterprise after other claims are paid out in full. If the underlying business prospers, the shareholders' wealth will multiply manifold. But if the business fails, shareholders may lose everything, unlike creditors who will have the first claim on the assets of the company. How much are the returns? Being residual owners in an enterprise necessarily means that shareholders can have no guarantee regarding the quantum of returns. Different companies operating in different sectors perform differently under different business cycles. But a well-diversified portfolio of high-quality stocks held for a long period of time should deliver higher returns than the nominal GDP growth o

This article was originally published on December 21, 2021, and last updated on August 12, 2022.