common stock

A security issued by a corporation that represents ownership. Common stocks are often called equities because shareholders own the net assets (equity) of a company. As partial owners, common stockholders have the right to vote on corporate matters and receive dividends. Stocks are more volatile than bonds, but have historically provided higher long-term returns. It is possible to lose a significant part or all of one’s investment in a common stock. Also, in the event of a firm’s bankruptcy, bondholders are paid before shareholders.