A common stock is a security that represents your (as a shareholder) ownership stake within a particular company, subject to the right of preferred shareholders. Typically, a common share gives the holder the right to vote on the selection of management and directors, and entitles him/her to a proportionate, but undefined, claim on company profits. Indeed, many established companies pay what are known as dividends (usually quarterly cash payments on a per share basis) out of earnings to common shareholders, subject to the discretion of the company's Board of Directors.
Having said this, the vast majority of today's investors purchase common shares because of their potential for capital appreciation. Over time, as we mentioned in the introduction to this section, stocks have shown their ability to outperform all other investment vehicles by a considerable margin.
For many years, common shareholders were issued a share certificate.
Below are some of the rights and benefits of owning common shares: