Understanding the basics of stocks is essential for anyone looking to invest in the financial markets. Stocks represent ownership in a company, and when you buy shares, you are purchasing a small piece of that business. This ownership gives you the right to partake in the company's profits and decision-making processes through voting rights. Learning how stocks work helps you make informed choices about your investments and understand the associated risks and rewards. There are two primary types of stocks: common and preferred. Common stock typically allows shareholders to vote on company matters and receive dividends, which are portions of the company's earnings. Preferred stock, on the other hand, usually does not offer voting rights but provides a fixed dividend payment, making it less risky. Understanding the differences between these stock types is crucial for developing a tailored investment strategy.