Stock and shares

As a means to raise capital, companies issue shares, known as stock in the United States, which in essence makes the holder a partial owner of the company and thus entitled to dividends if they are paid out. The typical scenario is that an investor purchases a given number of shares of stock at a given price, holds them until the price has improved sufficiently to warrant a sale, at which time the investor realizes a profit.

Picking stocks, however, requires a high level of knowledge of market trends and involves active monitoring and detailed research. In the instance of collective investment opportunities like mutual funds, investors leave the research and market acumen to the fund managers. The fund will hold multiple stocks as well as other asset classes which as an invested pool earn dividends for investors. Shares in the mutual fund also increase and decline in value and may be sold for a profit by share holders.

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