What are stocks?

Stocks are shares that represent ownership in a company, allowing shareholders to have a stake in the company's assets and earnings. When you purchase stocks, you are effectively buying a small piece of that company, which can increase in value if the company performs well. This ownership also often entitles shareholders to vote on key company decisions and receive dividends, which are distributions of profit.

Other options describe different financial instruments that do not represent ownership. For example, debt securities, such as bonds, involve borrowing rather than ownership, as the investor is lending money to the issuer. Cash equivalents are generally low-risk investments that provide liquidity and interest but do not convey any ownership in a company. Fixed income securities, like certain bonds, provide regular income without giving investors any claim on the company's equity. Thus, understanding that stocks are directly related to ownership helps distinguish them from these other financial instruments.