Stocks are financial instruments that represent equity ownership in corporations. Typically there are two types of stock issued by corporations: common stock and preferred stock. Common stockholders elect the board of directors and support the direction of overall corporate policy. Although common stockholders have these benefits, one disadvantage of holding common stock is that in the event of bankruptcy common stockholders have rights to a corporation’s assets after creditors and preferred stockholders. Generally speaking when individual investors purchase stock in a corporation they typically purchase common stock.
