Common Stock

Common stock represents an ownership stake in a corporation. Corporations issue common stock to raise capital for the business.

Common stock is the most basic form of stock and is typically what people reference when they talk about simply "stock." When you buy common stock, you purchase a piece of the company and become a shareholder.

Holders of common stock, called shareholders, own a portion of the company and have voting rights on corporate issues such as members on the board of directors or takeover bids.

Because of the voting rights of common stock, shareholders essentially control the business. Common stockholders may also receive dividends from the company.

Common stock is different than preferred stock. Preferred stock is a type of stock that has certain privileges over common stock but does not carry voting rights. Like common stock, preferred shares represent an ownership stake in a corporation.

One key difference between the two types of stock is that preferred shareholders have priority over common shareholders when it comes to dividends and assets in the event of liquidation.

Shares of common stock are issued in the primary market through an initial public offering (IPO) and then trade in the secondary market, typically on a stock exchange.

Common stock is bought and sold on exchanges such as the NYSE or the NASDAQ, and these exchanges provide real-time pricing on the value of a company. Common stock is generally a liquid investment because stockholders can liquidate their shares readily at market prices.

Common stock is the most widely held investment for retirement savings. Many people invest in common stock through retirement accounts such as 401(k)s and IRAs. Common stock is a popular investment for those looking to build long-term wealth.