Common stock

Imagine you and your friends want to open a lemonade stand. You each put in some money to start the business. When you do this, you become part owners of the lemonade stand. The amount of money you put in determines how much of the business you own.

Common stock works the same way. When a company wants to raise money, they can sell pieces of ownership in the company, called shares of stock. People who buy these shares become part owners of the company. The money from the sale of the shares is used to help the company grow and make more money.

If you own shares of common stock in a company, you are entitled to a portion of the profits the company makes. This is called a dividend. The amount of the dividend depends on how well the company is doing.

But owning shares of stock can also be risky. If the company doesn't do well, the value of the shares can go down and you could lose money. So it's important to research the company and its performance before buying stock.

In summary, buying common stock is like becoming part owner of a company, and you can make money if the company does well, but you can also lose money if it doesn't.