What does owning a stock represent?

Owning a stock represents a claim on part of the company's assets and earnings because when an individual purchases shares, they essentially buy a small ownership stake in the company. Stocks are equity instruments that give shareholders rights to a portion of the company's profits, typically in the form of dividends, and to a portion of the company’s assets in the event of liquidation. This ownership is reflected in the voting rights usually associated with common stock, allowing shareholders to have a say in certain corporate decisions.

In contrast, options such as a loan given to the company relate to debt instruments, like bonds, where investors lend money to the company in exchange for interest payments. A guarantee of dividends does not represent the reality of stock ownership, as companies may choose to reinvest profits rather than distribute them as dividends. Similarly, a fixed return on investment does not apply to stocks, since their value can fluctuate widely based on market conditions and company performance, making returns variable rather than guaranteed.