What is the primary characteristic of common stock?

The primary characteristic of common stock is ownership in the company. When an investor purchases common stock, they are acquiring a share of ownership in that company, which gives them a claim on a portion of the company’s assets and profits. This ownership structure typically comes with voting rights, allowing shareholders to participate in decisions such as electing the board of directors or voting on significant corporate policies.

In contrast, fixed dividend payments are associated with preferred stock, not common stock, as common stock dividends can vary and are not guaranteed. The notion of guaranteed investment returns is inaccurate for common stock since the returns can fluctuate based on company performance and market conditions, making common stock inherently riskier. While common stockholders do have voting rights, there are certain forms of stock that may not provide these rights, but fundamentally, the primary characteristic remains the ownership aspect.