what can you do with stocks — Practical Guide

What Can You Do With Stocks

Stocks give individual investors a range of financial and strategic options. This guide answers the question “what can you do with stocks” and walks you through rights of ownership, ways to acquire shares, investment and trading strategies, risk controls, tax and regulatory basics, and practical steps to begin.

Introduction

What can you do with stocks? In short: stocks let you own a slice of a company and use that ownership for capital growth, income, trading, risk management, and corporate influence. This article is written for beginners and active investors alike. You will learn the practical uses of stocks, core strategies (buy-and-hold, dividends, trading, hedging), key tools (options, margin), tax and regulatory considerations, and a step-by-step checklist to get started. Throughout the guide we remain neutral, factual, and focused on regulated public markets.

As of 2026-01-15, according to Benzinga and MarketWatch reporting, market dynamics such as government-level actions in bond markets influenced interest rates and broad market sentiment—e.g., the 30-year mortgage rate briefly fell below 6% and the 10-year Treasury yield was near 4.19%—which can affect equity valuations and investor decisions. (Source: Benzinga/MarketWatch reporting, 2026-01-15.)

Definition and basic rights of stock ownership

• What is a stock? A stock (or share) is a unit of ownership in a corporation. Owning stock gives you an economic claim on company assets and future profits proportional to the shares owned.

• Common stock vs preferred stock:

  • Common stock: typically carries voting rights and potential for capital appreciation. Common shareholders are last in line at liquidation but benefit from upside.
  • Preferred stock: usually has priority for dividends and liquidation over common shares but typically has limited or no voting rights. Preferred shares often behave more like fixed-income instruments.

• Typical shareholder rights:

  • Economic claim: right to dividends when declared.
  • Voting rights: elect board members and approve major corporate actions (varies by share class).
  • Information rights: access to financial reports and proxy materials.
  • Residual claim: right to company assets after debts are satisfied in liquidation (after creditors and preferred holders).

Understanding these rights helps answer the practical question: what can you do with stocks? You can expect financial benefits (price appreciation, dividends), governance participation (voting, proposals), and financial uses (collateral, lending).

Ways to acquire stocks

• Buy on exchanges via brokerages: the most common route is to place market or limit orders through a broker to buy shares on public exchanges.

• Direct Purchase Plans and DRIPs: some companies and transfer agents offer direct stock purchase plans or Dividend Reinvestment Plans (DRIPs) allowing small or recurring purchases and automatic reinvestment of dividends.

• Initial Public Offerings (IPOs): new public listings provide a way for some investors to buy shares at offering, though IPO allocation and price volatility can be issues.

• Employee stock plans: stock options, restricted stock units (RSUs), and employee stock purchase plans (ESPPs) are common forms of compensation that give employees equity exposure.

• Mutual funds, ETFs, and fractional shares: you can gain exposure to many stocks through index funds, sector ETFs, or mutual funds; many brokers now allow fractional shares so you can buy a portion of expensive stocks.

Brokerage accounts and platforms

• Types of brokers:

  • Discount/online brokers: low-cost execution, self-directed platforms, good for most retail investors.
  • Full-service brokers and advisors: offer financial planning, research, and personalized advice—typically higher fees.

• Choosing a broker: consider costs (commissions, spreads, account fees), order execution quality, trading tools, educational resources, mobile/web experience, available account types (taxable, IRA, retirement accounts), customer support, and regulatory standing.

• Regulation: U.S. brokerage activity is regulated by the SEC and self-regulatory organizations like FINRA; check broker registration and complaints before opening an account.

Primary objectives and uses

People hold stocks for several main reasons. The question “what can you do with stocks” can be answered by grouping these objectives:

• Long-term investing (wealth accumulation and retirement saving).
• Income generation (dividends and dividend strategies).
• Trading and short-term speculation (capture volatility or market trends).
• Portfolio diversification and risk management.
• Corporate participation (voting and shareholder engagement).
• Financial uses (collateral, lending, tax planning).

Long-term investing and buy-and-hold

• Buy-and-hold is a core strategy for wealth accumulation. Over long horizons, equities historically have provided higher average returns than cash or many bonds—though past performance is not a guarantee of future results.

• Index funds vs individual stocks: for many investors, low-cost index funds or ETFs offer broad diversification and low maintenance. Active selection of individual stocks requires research and higher risk tolerance.

• Compounding and time horizon: the power of compounding means returns reinvested over decades can materially grow capital. Time horizon and risk capacity determine allocation to stocks vs other assets.

• Risk considerations: equities can experience large drawdowns. Align stock exposure with goals (retirement, education) and time horizon.

Income strategies (dividends and yield)

• Dividend-paying stocks return cash to shareholders. Metrics to monitor include dividend yield (annual dividend ÷ share price), payout ratio (dividends ÷ earnings), and dividend history.

• Dividend Reinvestment Plans (DRIPs) automatically convert cash dividends into more shares, accelerating compounding.

• Income investors may focus on dividend growth, stability, and sectors like utilities, consumer staples, REITs, or dividend aristocrats. Remember, dividends are not guaranteed.

Trading and speculation

• Trading styles include day trading (intraday), swing trading (days to weeks), and position trading (weeks to months).

• Traders often use technical analysis, chart patterns, momentum indicators, and risk-defined position sizing. Trading requires strict risk controls, a trading plan, and attention to transaction costs and taxes.

• Volatility and liquidity matter: higher liquidity eases entry/exit; higher volatility creates profit/loss potential but increases risk.

Advanced trading tools and techniques

Answering “what can you do with stocks” includes using derivatives and leverage for hedging or speculative purposes. These tools require experience and awareness of amplified risk.

Options and derivatives

• Options basics: call options give the right to buy shares at a strike price before expiry; put options give the right to sell. Options are used for speculation, hedging, and income generation.

• Common option strategies:

  • Buying calls/puts: directional bets with limited downside (premium paid).
  • Covered calls: sell call options against stock you own to earn premium (income) but cap upside.
  • Protective puts: buy puts to limit downside on stock holdings.
  • Spreads and iron condors: defined-risk multi-leg strategies to trade volatility/range outcomes.

• Options risks: time decay, implied volatility changes, and assignment risk for short options positions.

Margin and short selling

• Margin trading: borrowing cash from a broker to buy additional shares amplifies gains and losses. Margin requirements and maintenance margin can trigger margin calls.

• Short selling: selling borrowed shares to profit if price falls. Short sellers face theoretically unlimited loss potential if prices rise and must pay borrowing costs and potentially return shares on demand.

• Risk controls: maintain conservative leverage, use stop-losses, and understand margin rules.

Securities lending and share borrowing

• Brokers lend shares to other market participants (commonly to short sellers). Lenders may earn lending fees or interest; this is typically managed at the broker level.

• Institutional and retail clients can sometimes opt into securities lending programs to earn incremental yield on idle shares—check broker terms and counterparty protections.

Corporate actions and shareholder participation

• Common corporate actions: stock splits, reverse splits, share buybacks, dividends, mergers & acquisitions, spin-offs, and rights offerings.

• Shareholder rights and governance: shareholders can vote on directors, executive compensation, and major transactions via proxy voting. Activist investors may seek board changes to improve performance.

• Proxy voting and engagement are ways retail and institutional owners can influence corporate strategy, governance, and capital allocation.

Using stocks in personal finance and as financial instruments

• Stocks as collateral and lending: brokers and lenders may accept securities as collateral for margin loans or pledged loans (home equity-style products secured by securities). Collateralized loans carry margin and liquidation risks if stock values fall.

• Retirement and tax-advantaged accounts: IRAs, 401(k)s, and other tax-advantaged accounts can hold stocks. Using these accounts affects tax treatment on dividends and capital gains.

• Portfolio margining: sophisticated accounts may use portfolio margin to calculate risk-based margin requirements across positions; this can lower margin needs but increases complexity.

Taxation and regulatory considerations

• Capital gains tax: in many jurisdictions, short-term capital gains (holding period under one year in the U.S.) are taxed at ordinary income rates; long-term capital gains usually benefit from lower rates.

• Dividends: qualified dividends in the U.S. may be taxed at favorable long-term capital gains rates; nonqualified dividends are taxed at ordinary income rates. Rules vary by country and account type.

• Tax-advantaged accounts: Roth IRAs provide tax-free withdrawals (subject to rules), while Traditional IRAs or 401(k)s provide tax-deferred growth but taxed on withdrawal.

• Reporting obligations: investors must report sales, dividends, and other taxable events on tax filings; brokers provide annual tax forms (e.g., 1099 series in the U.S.).

• Regulatory protections: securities markets are overseen by regulators such as the SEC and self-regulatory organizations (e.g., FINRA in the U.S.). Check broker registration and adviser credentials; review complaint histories.

Risk management and portfolio construction

• Diversification: spreading investments across sectors, geographies, and asset classes reduces idiosyncratic risk.

• Asset allocation: align stock allocation with age, risk tolerance, and goals. Glide-path approaches gradually reduce equity exposure approaching retirement.

• Position sizing: limit exposure to any single stock to avoid concentration risk.

• Stop-loss and rebalancing: use stop-loss orders sparingly and rebalancing to maintain target allocation.

• Emergency savings: keep cash reserves to avoid forced selling in down markets.

Research, analysis, and decision-making

• Fundamental analysis: evaluate financial statements (income statement, balance sheet, cash flows), profitability metrics (ROE, ROA), valuation ratios (P/E, EV/EBITDA), and qualitative factors (management quality, competitive moats).

• Technical analysis: chart patterns, moving averages, RSI, MACD, and volume analysis are tools traders use to time entries and exits.

• Quantitative screens and data: use screeners for market cap, dividend yield, growth metrics, and momentum to filter opportunities.

• Resources for research: company filings (10-K, 10-Q), earnings calls, analyst reports, independent research houses, and brokerage research platforms.

Costs, liquidity, and market mechanics

• Trading costs: commissions (often zero for many online brokers), bid-ask spreads, market impact, and exchange fees. High-frequency or large-volume traders must pay close attention to execution quality.

• Liquidity: more liquid stocks have tighter spreads and smoother execution. Thinly traded small-cap stocks may have wide spreads and higher volatility.

• Market hours and extended trading: most U.S. equities trade in regular hours with pre- and post-market sessions; extended hours trade can suffer lower liquidity and increased volatility.

• Order types: market orders (immediate execution at current price), limit orders (execute at a specified price or better), stop orders (trigger at specified price), and more complex conditional orders.

Common investor strategies and examples

• Index investing: low-cost, passive exposure to a broad market (S&P 500, total market funds).

• Value investing: seek undervalued companies trading below intrinsic value.

• Growth investing: focus on companies with high expected earnings growth.

• Dividend investing: target reliable dividend payers for income and stability.

• Momentum trading: buy assets showing upward price momentum and sell when momentum weakens.

• Dollar-cost averaging: invest fixed amounts on a regular cadence to reduce timing risk.

Risks, scams, and consumer protections

• Major risks: market risk (broad declines), concentration risk, liquidity risk, counterparty/broker risk, and operational risk.

• Common scams: pump-and-dump schemes (especially in illiquid names), fraudulent investment pitches, and misleading social-media stock tips. Beware of anyone promising guaranteed returns.

• Protect yourself: verify broker/adviser registration, review regulatory disclosures, check broker custody practices, and maintain strong personal cybersecurity for trading accounts.

Special topics and variations

• International stocks and ADRs: invest in foreign companies through direct listings or American Depositary Receipts (ADRs). Consider currency risk, differing disclosure standards, and geopolitical/regulatory differences.

• Market capitalization: small-cap vs large-cap stocks differ in volatility, liquidity, and growth potential.

• Sector-specific considerations: cyclical vs defensive sectors behave differently across economic cycles.

• Thematic and ESG investing: invest by theme (AI, clean energy) or ESG criteria; be aware of differences in definitions and potential tracking/greenwashing issues.

Practical steps to get started

1. Define goals: retirement, wealth accumulation, income, or trading.
2. Choose account type: taxable brokerage, traditional or Roth IRA, or employer-sponsored plans.
3. Select a broker: prioritize cost, tools, and regulatory standing.
4. Learn order types and margin rules: practice with paper trading if available.
5. Start diversified: use ETFs/index funds or a small basket of stocks.
6. Set risk rules: position limits, stop-loss policy, and overall allocation.
7. Continue education: follow company filings, reputable financial education pages, and broker research.

When beginners ask “what can you do with stocks,” a practical answer is to start with diversified, low-cost vehicles and progressively learn active strategies while protecting capital.

Glossary of key terms

• Share: one unit of ownership in a company.
• Market order: buy/sell immediately at current market price.
• Limit order: execute only at a specified price or better.
• Dividend yield: annual dividend ÷ current share price.
• P/E ratio: price-to-earnings ratio; price per share ÷ earnings per share.
• ETF: exchange-traded fund that holds a basket of assets.
• Mutual fund: pooled investment vehicle priced end-of-day.
• Margin: borrowing from a broker to increase position size.
• Short sale: selling borrowed shares to profit from a decline.
• Option: contract granting right (not obligation) to buy/sell at strike price.
• IPO: initial public offering; first time shares are sold to the public.
• DRIP: dividend reinvestment plan.

Timely market context (reported facts)

• As of 2026-01-15, according to Benzinga and MarketWatch reporting, policy actions and proposals related to government-backed mortgage bonds contributed to a rally in bond markets and influenced interest rates. Reported figures at that time included the 30-year mortgage rate dipping below 6% and the 10-year Treasury yield near 4.19%.

• These fixed-income moves can affect stock valuations and investor choices: lower borrowing costs and improved mortgage affordability may support consumer-facing sectors, while changes in treasury yields affect discount rates used in stock valuation models.

• Data and indicators worth monitoring (quantifiable items investors often track): market capitalization and daily trading volume of individual stocks, bond yields (e.g., 10-year Treasury), option implied volatility, ETF flows, and on-chain metrics for tokenized assets where applicable.

(Sources: Benzinga and MarketWatch reporting, 2026-01-15.)

How Bitget can help beginners and active investors

Bitget provides trading and educational tools for investors interested in markets. If you explore diversified exposure through equities and derivatives, consider platforms and wallets that support secure custody and a learning environment. For crypto-native investors using tokenized equity products or cross-asset strategies, Bitget Wallet and Bitget’s platform offer integrated tools—always check regulatory status and product suitability for your jurisdiction and risk profile.

Final notes and next steps

What can you do with stocks? Plenty: you can invest for the long term, generate income with dividends, trade short term, use options for hedging or income, lend shares, vote and engage in governance, or use equities as financial collateral. Start by defining goals, picking appropriate account types, and prioritizing diversification and risk controls.

Further practical action: open a regulated brokerage account, start with low-cost ETFs, practice option basics in a simulated environment if interested in derivatives, and review tax implications for your jurisdiction. To explore more digital tools for diversified investing and custody, consider learning about Bitget Wallet and Bitget’s educational resources.

Ready to learn more? Explore Bitget’s learning center and product pages to deepen your understanding of markets, trading tools, and wallet security. Keep researching, stay diversified, and design a plan aligned with your financial goals.

References and further reading

• Motley Fool, Investopedia, Fidelity, Bankrate, Charles Schwab, Vanguard, AAII, Washington State DFI — investor education and brokerage resources.
• Market reporting and bond-market context: Benzinga and MarketWatch reporting (as of 2026-01-15).

Note: This article is informational and educational only. It is not investment advice. Tax and regulatory rules differ by jurisdiction; consult a licensed professional for personal guidance.