What are stocks? Explained simply
A stock makes you a part-owner of a company. Here's how that works and what to consider in Switzerland.
What are stocks?
Stocks are shares in a company's equity. If you buy a stock, you become a part-owner of the company, in proportion to your share, and participate in its profit and value development.
How does a stock work?
A company splits its equity into many small, equal units: company → stocks → many shareholders. Each individual stock belongs to a different person or institution.
Why do investors buy stocks?
| Benefit | Explanation |
|---|---|
| Appreciation | Companies can grow in value over time |
| Dividends | A share of the company's distributed profit |
| Voting rights | A vote at the shareholder meeting |
| Tradability | Tradable on the exchange every trading day |
What risks do stocks carry?
- Price losses: A stock's value can fall significantly.
- Company risk: If the company fails, the stock can become worthless.
- Market risk: If the whole market falls, individual stocks usually fall with it.
- Dividend cuts: Distributions aren't guaranteed and can be cut at any time.
- Concentration risk: A single stock lacks the diversification an ETF offers.
Stock or ETF?
A single stock concentrates on one company, an ETF automatically spreads across many. What that means for risk and opportunity is explained on the page What is an ETF?
Stock taxes in Switzerland
Capital gains are tax-free for private investors, dividends are taxable and subject to withholding tax, and the holding on 31 December counts towards wealth tax. How to enter this in your tax return is shown step by step on the page Stocks tax return.
Which broker is right for you?
To buy stocks you need a custody account with a broker or bank. What matters for fees, exchange access and the tax statement is shown in the broker comparison.
How could a stock portfolio develop?
Enter your stocks in the Depotly financial cockpit and see how your wealth could develop over the coming years.
Keep an eye on your wealth Enter your stocks in the financial cockpit and see how your portfolio could develop.Further reading: Stocks and taxes in Switzerland, Stocks in the tax return and Broker comparison.