Stocks: A stock is a share of ownership in a company.

WHAT ARE STOCKS?

Companies sell stock to raise funds, often to invest in growing the business, but before investors can buy stock in a company, that company must offer it. The company will arrange with bankers to purchase securities and sell them to the public.

TWO TYPES OFFERED

1. Primary Market
2. Secondary Market

Primary market insures the company will receive money from the sale.

In a secondary market transaction, money is not received by the issuing company but exchanged between investors.

BUYING STOCK

When you buy stock, you purchase what are called shares. The shares represent a specific amount of ownership in a company. This ownership entitles you to a portion of earnings of the company. Stocks will vary in price and returns due to company’s actual and perceived success. When you buy stock in a company, you’re called a stockholder. All stockholders are able to vote on key company changes and/or board of director elections. Both of which may effect rate of returns in varying degrees.

Although the stock market can be higher risks investing, overtime the stock market in the past, has outperformed other types of investments. So if you’re a high-risk trader or a long-term investor, the stock market can be a viable way to plan for retirement. However, do be cautious with having all your retirement funds in the stock market unless your risk tolerance is high. So the key here would be to diversify, or Asset Allocation.

HOW TO MAKE MONEY ON STOCKS

1. Earn dividends or profits that shareholders receive as income
2. Sell your stock at a higher price then what you purchased it for.

TYPES OF STOCKS

• Common Stocks
• Preferred Stock

This stock is the standard stock that most people own. With this type of stock you usually have rights to vote and receive dividends (pending on stock and company). If the company is sold, then stock holders would share in the profit of the sale after the company pays off creditors and such.

This stock owners have a prior claim to the company’s assets over the owners of common stock. This stock doesn’t usually include voting rights, “profit” sharing or a higher dividend. Instead it pays a fixed dividend, no matter the increase of value in the company.

VOLATILITY

Stocks will fluctuate in value and can be hard to predict.

Two types of fluctuation:

Volatility – this stock will rise quickly and with great increase, but may be risky if you unable to sell them prior to decrease in value.
Blue Chip Stocks – (Low Volatility) – Established stocks (companies) that increase more slowly but steadily over time.

FINDING A FINANCIAL ADVISOR

A financial advisor can ensure you’re saving enough to meet all your immediate and retirement needs. Find out what’s best for you and your retirement goals! Learn more about the different asset allocation types, explore the areas above and fill out our on-line form to find a certified financial advisor in your area.