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What are stocks?

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Companies can fund themselves in one of two ways: using debt, known as bonds, or using equity shares in the business.

Shares are also known as stock or equities.

The price of a share is determined by how much demand there is for them in the market. If demand for a specific stock is high, its value will go up. If demand is low, its price will fall.

Fund managers aim to make money for investors through buying shares they expect to increase in value over time.

If a company makes profits, it may choose to pay some of it out to their shareholders. This is called a dividend and is why some specific funds or trusts can pay a regular income.

Stocks are seen as more risky than bonds because shareholders are the last to get paid if the company goes belly up, their prices tend to be more volatile, and the income received from shares is less certain.

However if a company is doing well, the value of its shares will increase, giving investors the opportunity to sell them off for a profit.