In finance, the term "stock" denotes the entire portion of an entity which can be owned. Typically, the term is used in reference to ownership in companies which are listed on a stock exchange.

Shareholders hold stock in a company in the form of shares, each of which represents a specific portion of a company's total stock. The number of shares which a shareholder owns is listed on a stock certificate. The larger a portion of a company's shares owned by an investor, the large a portion of the company's stock that investor owns.

Today the term “shares” is often used synonymously with the word “stocks”. However, it is more accurate to differentiate between stocks (a portion of ownership in a company) and shares (the units which make up a stock). A person can have many shares in a single stock representing a single company, or own shares in many different stocks each representing a different company.

Over the long-term, stocks generally yield higher returns than savings accounts or cash on delivery (COD) investments, but as a rule, investing in stocks bears a much higher level of risk. Only limited investment in stocks is recommended. This is especially true for cautious investors without founded knowledge of the overall economic situation and the country, industry and company in which they plan to invest.

Index funds, which follow the rates of a full stock exchange rather than individual company listings, are more diversified and therefore less risky. Many methods are used to calculate the value of stocks, of which chart and fundamental analyses are the best-known.

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Expert Benjamin Manz
Benjamin Manz is CEO of and an independent expert on banking and finance.