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What is Common Stock?
When you purchase the common stock of a company, you become a partial owner — or shareholder — of the company. The company will ask you to vote for the board of directors each year, and help determine other specific matters.
The company also may pay you dividends, which are a distribution of the company’s earnings. The price of a share of a company’s common stock generally changes daily. It’s based on the amount of money an investor is willing to pay for the stock on that day. When the current share price is higher than the price at which you purchased shares, the value of your stock has appreciated. When the current price is lower, the value of your shares has declined.
More than 30,000 stocks are available in the United States and there are many thousands more in foreign exchange. Most common stocks are bought and sold in organized markets, such as the New York Stock Exchange (NYSE) or the NASDAQ–American Stock Exchange (AMEX). These markets report prices daily in most local and national newspapers, so you can follow the progress of the stocks you own or are interested in buying.
You can purchase stocks through brokers or in some cases directly from the issuing company. When you buy shares of a common stock, you typically are expressing a vote of confidence in the future of that company. As a shareholder, generally you hope to gain from price appreciation, dividend income or both.
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