Owning a stock makes you a part-owner of the business. You benefit in two ways: capital appreciation if the share price rises, and dividends if the company distributes part of its profits. Over the long run, broad equity markets have historically returned 6–8% per year in real terms, far above any bank deposit, but with substantial year-to-year volatility — drawdowns of 30–50% have occurred several times per century.
Stocks are issued in two main classes. Common shares carry voting rights and last claim on assets in liquidation; preferred shares pay a fixed dividend and rank ahead of common in bankruptcy but usually have no vote. Most retail investors buy common shares of companies like Nestlé, Roche, ASML, LVMH or Apple either directly via a broker or indirectly through a fund.
The right mental model for a stock is part-ownership of a productive business, not a ticker that goes up and down. Short-term price moves reflect mood and liquidity; long-term returns reflect earnings growth and dividends. For most households the rational portfolio is broad index funds rather than individual stock picking, because over 80% of professional stock pickers underperform a low-cost index over 10 years.
An investor buys 100 Nestlé shares at CHF 95 (CHF 9,500). Over five years Nestlé pays CHF 16 in cumulative dividends per share (CHF 1,600) and the price rises to CHF 110, giving a capital gain of CHF 1,500. Total return: CHF 3,100, or about 6.1% annualised pre-tax.