Common Stock

Definition - What does Common Stock mean?

Common stock is a share of ownership in a company that comes in the form of a security. People who own common stock have equity in the company. The more stock that a person owns in a company, the larger his or her percentage of ownership. Holders of common stock have voting rights when it comes to electing a board of directors for the company.

In the context of the law, people who purchase stocks become legal shareholders in the business.

Justipedia explains Common Stock

People purchase common stock as a way of investing in a business. If the value of the stock goes up, then the person who owns the stock makes a profit of the difference between the new price and the price he or she bought the stock at.

However, even though common stock can be a very lucrative investment, stockholders can also lose money if the value of the stock dips beneath the price they purchased it at. Stocks are traded throughout the world on a number of different stock exchanges.

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