Stocks are shares of equity or ownership in a corporation. A stock holder owns a fractional piece of the entire corporation. Corporations can issue two basic types of stock: common and preferred.


Common stock is the basic ownership shares in a corporation. When a corporation decides to "go public" they sell shares to investors who expect to profit when the company profits. Once a share has been sold by the company, it will trade from then on among investors. Common stocks offer no performance guarantees, but over time have typically produced a better return than many other investments. Investors buying common stocks take a risk that the company will not do well or that the stock market in general will decline, taking their share values down too. At worst, the entire amount invested can be lost, but no more than the amount invested. Shareholders are not responsible for corporate debts.

For their part, corporations typically take the money received by selling stock and use it to build or expand their business.


Preferred stocks are also ownership shares issued by a corporation and traded by investors. Preferred stocks are different from common stocks in many ways, but typically preferred stocks have less risk but also limited reward compared to common stocks.


Some corporations issue different classes of stock. These different classes can be either common or preferred shares, and they will have different terms and characteristics, sell at different prices, and may have different dividend and ownership properties.

As a general rule, all U.S. stocks that have an active quote and trading market are available for purchase and sale over the Internet using your account. Many other stocks (bulletin board or pink sheet issues and foreign stocks) are available by placing the order with a live broker.