A common stock is the most basic stock type offered by public companies. Stocks allow investors to purchase partial ownership of a company. Common stocks make up the majority of stocks available on the market.
Common stock owners have voting rights on company issues like selecting directors or deciding corporate policies. If a company decides to pay out its profits as dividends, common stock owners receive cash based on the number of shares they own.
Investments in common stocks will generate returns if the stock’s price increases, but if a company goes bankrupt, creditors and preferred stockholders take precedence over the claims of common stockholders. If a company goes under, it is possible for common stock owners to lose their entire investment.