What are stocks?

Key Points

Stocks represent investors' ownership of a company.

By buying stocks, you can share the profits of a company's growth.

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

Concept Explanation

Stocks are share certificates issued by a joint-stock company to investors when raising capital. Each share of stock you buy represents ownership of a basic unit of the company.

This ownership means that investors who purchase stocks can share the profits brought by the company's growth. There are two ways for investors to profit: one is as the company's value increases, the stock price rises continuously, enabling investors to earn the price difference through buying and selling. The second is that some companies with excellent cash flow will regularly distribute dividends, allowing investors to also earn cash income through dividends.

However, it is important to note that not all companies are equally excellent. If you accidentally buy stocks of a company in decline, you may also suffer losses.

Basic features of stocks

Irredeemability: After investors subscribe to stocks, they cannot return them to the company, but can only sell them to other investors in the market.

Profitability: Shareholders have the right to receive dividends or bonuses from the company based on the profits level and dividend policy of the company.

Liquidity: Stocks of listed companies can be freely traded and circulated through stock exchanges. Common stock exchanges include domestic ones like Shenzhen Stock Exchange, Shanghai Stock Exchange, and overseas ones like Hong Kong Stock Exchange, nyse, nasdaq, etc.

Price Volatility: Stock prices fluctuate, bringing uncertainty and risk. After buying stocks, one may either profit or incur losses.

Participation: Shareholders have the right to attend shareholder meetings, exercise voting rights according to their shareholding proportion, and participate in significant company decisions.