Equity – or stock – represents a fraction of a company. Shares are the unit in which these fractions are measured. Shares are sold during private sales or generally traded on stock exchanges if the company is listed (also called public). A company usually sells its shares for money to operate its business. Stocks often pay dividends (parts of their profits) to investors, and sometimes give them rights to vote in shareholder meetings (common stock).
Stocks have long outperformed bonds but are also more volatile than bonds. In case of a corporation’s bankruptcy, if you have preferred stock, you will have higher claims on assets and earnings compared to common stockholders. But no voting right. In case of bankruptcy, bondholders are always favoured over stockholders.
Shares are the most common type of securities and are almost always part of any investor’s portfolio.
Not all companies pay out dividends, but some others reinvest profits into the activity to be able to grow more the share prices. Some others also decide not to pay dividends as a strategy.