A stock is a share of a company’s assets and earnings. People who own shares are often referred to as shareholders. Stocks are one of many ways to invest to create passive income and returns on principal. How do Stocks Work? Since shareholders partially own companies they invest in, they are entitled to a portion of the business’ earnings and assets. When a company performs well and their earnings increase, so does the value of the stock in most cases. Investors can buy individual stocks, or buy stocks through mutual funds and/or ETFs. Types Of Stocks The two primary types of stocks are common stock and preferred stock. Common: These types of stocks are the most common and they allow investors to partially own a company. Common stock shareholders also have voting rights and are sometimes paid dividends. However, when a company has to liquidate assets, common shareholders are usually one of the last groups to get paid. Preferred: Similar to common stock, preferred stock allows investors to have a stake in a company. The main difference is they have priority on the distribution of