Common Stocks

When you hear most people talk about investing in stocks they are talking about common stocks.  When you buy a share of common stock, you own a share of the company that issues it.  When you own a stock it is known as equity ownership.  The price of the stock goes up and down depending not only on the performance of the company, but how investors and analysts think the company will perform in the future.  Other broader market issues can also affect stock prices (Economic Indicators & Other Causes That Can Affect Stock Prices Other Than Company News) As an owner of a common share, even just one, you are entitled to vote on major issues affecting the company and attend the annual shareholders meeting.

A stock may or may not pay dividends.  Dividends are a share of the company’s net profits (profits after all expenses and taxes have been paid) that are distributed by the company.  The Board of Directors determines the amount, if any, of the dividend (see Stock Dividends & Dividend Re-Investment Plan (DRIPs) ) . Dividends are usually paid quarterly, based on how much money the company earned, how much money they need to hold on to, to reinvest in the company and how much they can return to the shareholders.  If profits fall, dividend payments may be cut or eliminated.  Dividends are usually taxable in the year the shareholder receives them.