Common Stock is a type of security. It is called “common” to differentiate it from “preferred” stock. When a person buys common stock in a company, they become shareholders of that company and are entitled to part ownership of that company. In addition, they are entitled to a number of rights and privileges.

These include: the right to vote on matters such as the choice of the board of directors, what the company’s corporate objectives should be, stock-splits, and other similar policy issues. In the event of the company going bankrupt, the holders of common stock will only receive their funds or returns on their investments after bondholders, preferred stockholders, and other debt holders have been paid.

On the plus side, common stocks are considered to perform better over time than bonds of preferred stock. Thus they provide better yields to their holders.