Glossary · Stocks and markets
Stock (share)
A stock (or share) is a small piece of ownership in a company: it gives you a slice of the company’s profits and, usually, a vote.
Also called: share, shares, equity, common stock
Directly or through funds and retirement accounts, 2025. In 1989: 32%.
Dividends reinvested, before inflation; 7.1% after.
In plain words
Imagine a pizza shop worth $100,000, split into 1,000 equal pieces. Buy one piece for $100 and you own 0.1% of the shop: 0.1% of its ovens, its recipes and, most importantly, its profits. That piece is a stock, also called a share.
Big companies are split into millions or billions of shares, and many of them trade on a stock exchange, where anyone can buy or sell them. The price changes all day long: it is simply what the last buyer paid the last seller.
Owners can make money in two ways: the company may pay part of its profit out as dividends, and the share price may rise as the business grows. Neither is promised. In the United States, 56% of families owned stocks in 2025, most of them through funds and retirement accounts rather than shares of single companies.
Example
Your slice of the profit
- A company has 10 million shares. You buy 100 of them at $20: you pay $2,000.
- This year it earns $30 million: $3 per share (its earnings per share). Your slice of the profit is 100 × $3 = $300.
- It pays $1 per share as a dividend, so $100 lands in your account. The other $200 of your slice stays in the company to grow it.
- If investors decide the shares are now worth $25, your 100 shares are worth $2,500: a $500 gain on paper.
Over the long run a share’s price follows the company’s profits; from day to day it follows what people think of them.
One level deeper
Shareholders own the company but do not run it day to day. They elect a board of directors, which hires the managers. Most shares are common stock: one vote per share and a claim on whatever is left after everyone else has been paid. Preferred stock usually has no vote but receives its dividend first.
That “whatever is left” is where the risk lies. If a company goes bust, its workers, suppliers and bondholders are paid first, and shareholders often get nothing. In return, there is no limit to how far a share can rise. Investors want a reward for carrying that risk, and over long periods stocks have paid more than bonds, with much bigger swings. Since 1871, US stocks returned 9.4% a year with dividends reinvested.
A company’s total value on the market is its share price times its number of shares: its market capitalization. Selling shares to the public for the first time is an IPO.
How many American families own stocks
The share of US families holding stocks in any form (shares of their own, stock funds, retirement accounts) in each Survey of Consumer Finances, held every three years. It rose from 32% in 1989 to 56% in 2025; only 19% held shares of individual companies directly.
The numbers behind the chart
| Date | Families owning stocks |
|---|---|
| 1989 | 32% |
| 1992 | 37% |
| 1995 | 40% |
| 1998 | 49% |
| 2001 | 53% |
| 2004 | 50% |
| 2007 | 53% |
| 2010 | 50% |
| 2013 | 49% |
| 2016 | 52% |
| 2019 | 53% |
| 2022 | 58% |
| 2025 | 56% |
Why it matters
Stocks are how companies raise money to grow, and how ordinary savers get a share of that growth.
For many families, stocks held through retirement accounts are one of their biggest savings after their home.
Over long periods stocks have beaten bonds, cash and inflation, with painful years on the way. In the worst calendar year since 1872, 1931, the S&P 500’s total return was −41.8%.
A common mistake
Myth: Buying a stock means lending money to the company.
In fact: That is a bond. A stock makes you a part-owner: no fixed interest and no promise to get your money back, but a share of the profits and of any growth. And unless you buy in an IPO, your money goes to the person who sold you the share, not to the company.
Questions people ask
What is the difference between a stock and a share?
In everyday use they mean the same thing. “Stock” often means ownership in general (“I own stocks”), “share” one unit of it (“100 shares of Apple”).
How do you make money from stocks?
Through dividends (cash paid out of profits) and through a rising share price, which you collect when you sell. Together they make the total return. Since 1871, US stock prices rose 4.9% a year; with dividends reinvested, the return was 9.4% a year.
Can a stock go to zero?
Yes. If the company fails, its shares can become worthless, which is why owning many companies through a fund spreads the risk. But you cannot lose more than you paid, unless you borrowed to buy (see leverage).
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- US families owning stock (Survey of Consumer Finances): Board of Governors of the Federal Reserve System, Survey of Consumer Finances, historical tables based on public data (nominal), Tables 6 and 7.
- S&P Composite price and total return since 1871, and US consumer prices: Robert J. Shiller, Online Data (shillerdata.com); total return with dividends reinvested monthly, calculated by BigCapital.
- The Survey of Consumer Finances interviews a sample of several thousand families every three years; its figures are estimates with a margin of error.
- This page explains a term. It is not investment advice.