Stocks and equities

A stock (or share / equity) is a unit of ownership in a company. Own one share and you own a tiny piece of that business, including a claim on its future profits.

How you make money

1. Capital growth — the share price rises as the company grows more valuable.
2. Dividends — many companies pay out part of their profits to shareholders as cash.

Why prices move

Share prices reflect the market's changing view of a company's future profits — driven by earnings, the economy, interest rates, and sentiment. In the short term they can be volatile and even irrational; over the long term they tend to track business performance.

Risk and reward

Equities have historically delivered the highest long-term returns of the major asset classes — but with the biggest swings, including falls of 20–50% in downturns. That's the risk-and-return trade-off in action.

The sensible way in

Picking individual winners is hard even for professionals. Most people get broad, low-cost exposure through index funds and ETFs, owning hundreds or thousands of companies at once for instant diversification.

Key takeaway

Shares are the main engine of long-term growth in most portfolios — best held broadly, cheaply, and for many years.