A company divided into pieces
Imagine a company divided into one million equal pieces. Each piece is a share. If you own ten, your legal and economic interest is ten out of one million. In everyday investing language, stock and share usually refer to the same thing. People may say that they own shares in one company or invest in stocks as a group.
Public companies make some of those pieces available through a stock exchange. The exchange gives buyers and sellers a place to meet. You normally place an order through a broker rather than negotiating with the company itself.
How a shareholder might benefit
There are two common routes. The share price may rise, allowing the owner to sell for more than they paid. The company may also return some profit through dividends. Neither is guaranteed. Prices fall as well as rise, and a company can reduce or cancel a dividend.
Shareholders usually sit behind lenders if a company fails. Bondholders and other creditors have stronger claims on what remains. That extra uncertainty is one reason shares can offer higher potential returns than cash, but it also creates a real possibility of loss.
Price is not the same as value
A £5 share is not automatically cheaper than a £100 share. The company may have issued vastly more £5 shares. To compare company size, investors look at market capitalisation: share price multiplied by the number of shares. To think about value, they also consider earnings, cash flow, debt, growth and the price already being asked.
The quoted price reflects the latest point at which buyers and sellers met. It can move because of company news, interest rates, market mood or new expectations about the future. A price move tells you that the market's view changed. It does not tell you by itself whether that view is right.