As already mentioned in discussing the stock market, a stock is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings. The more stock you are holding, the greater is your ownership stake in the company. Being a shareholder, however does not mean you have any input in the day-to-day running of the business. Instead, the degree of influence of a person holding the stock is restricted to one vote per share to elect the board of directors at annual meetings. Although meaning of the stock is quite easy to grasp, all the variations of the stock can make investing in the stock market somewhat confusing.

Common stock is the most typical type of stock. When people discuss investing in stocks in general they are most likely referring to this type of stock. In fact, the greatest number of stock issued is in this form. Common shares represent ownership in a company and a claim (dividends) on a portion of profits. Investing persons or firms get one vote per stock share to elect the board members, who oversee the major decisions made by management.

Study of investing and stock market has revealed that in the long term, common stock, by means of capital growth, yields higher returns than almost every other investment. This higher return comes at a cost, because common stock carries the greatest risk. In case the company goes bankrupt and liquidates, the investor holding common stock shares will not receive money until the creditors, bondholders, and preferred shareholders are paid.