• Common stock is a type of corporate stock. Common stock represents the basic unit of ownership in a publicly traded company, according to the University of Philadelphia. Many basic characteristics of common stock exist, each of which distinguish common stock from other forms of stock, as well as other financial investments.
  
  

Shareholder Entitlement

• Common stock is a piece or "share" of equity in a company, entitling the buyer, or "shareholder," to an ownership stake in the corporation, according to Financial Web. This type of stock also gives shareholders rights to company profits, proportional to the amount of shares that they own. For instance, if a company issues 500,000 shares of common stock, and an individual buys 100 shares, the individual has a right to 100/500,000ths of the company's profit. However, shareholders do not have full ownership rights to the corporation, according to Financial Web. This means that they cannot perform actions that owners of privately held corporations are entitled to perform, such as reviewing company accounting books or hiring and firing employees (other than the board of directors), according to Financial Web.
  
  

Capital Gains and Dividends

• Common stocks have two ways of paying their shareholders: capital gains and dividends. Capital gains are stock price increases. If the price goes up, the monetary value of the shareholder's stake in the company increases, according to Financial Web. In contrast, dividends are payments that corporations issue to shareholders from the company's "retained earnings," which is the amount of profit a company has left over after paying operational expenses. Typically, corporations will pay dividends on a quarterly or yearly basis; however, they are not required to pay dividends, according to The Financial Pipeline. In fact, it is actually illegal for companies to pay dividends that exceed the company's amount of retained earnings.
  
  

Price Fluctuation

• Common stocks fluctuate greatly in price. Stock prices can go up or down based on the company's overall financial health, as well as on company events such as expansion, contraction and merger. Additionally, common stock prices can fluctuate based on external market conditions, such as recessions and economic boom cycles. These price fluctuations can lead to great profits or significant losses for shareholders.
  
  

Liquidity and Liability

• Common stock is a very liquid form of investment, meaning that shareholders can sell and collect cash quickly, according to Financial Web. Additionally, although shareholders are owners, they do not have any liability beyond their financial investment for company actions and behaviors.