Stock, simply speaking, is ownership in a company. Companies can issue a given number of shares of stock based on how much capital the company is trying to raise and the price of each share. Stocks are issued as either preferred or common. As the name implies, preferred stock gives holders certain privileges. Dividends on preferred stock are paid before those for common stock, and if a company fails, preferred stockholders get their share of leftover assets before common shareholders.

While common stock gets no special consideration in payment of dividends or the distribution of assets, it is those shareholders who exercise control over company management. In fact, some companies give preferred stockholders no voting power at all. The benefit for common stockholders does not lie in dividends, but in the company's performance, which serves to drive the stock price. Whereas preferred stock can be an income vehicle, common stock is more a means of investment. Buyers are drawn to common stock in the hope the company will do well competitively, driving up its value and with that, its stock price which can then be sold at a profit.