What Are Stocks,

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Stocks

Stocks, or equities, are issued by companies and represent proportionate ownership interest in those companies. Owning a share of stock represents a small piece of ownership in that company. When you own stock in a company, you can potentially benefit from the dividends that are issued by the company, and/or the stock price of the company if it goes higher. Conversely, when the performance of the company goes down, you may receive lower dividends or the price of the stock may decrease.
Why Invest in Stocks?
Stocks usually have higher short-term risk than bonds. Historically, equity markets have tended to move both up and down in a more dramatic manner on a day-to-day basis than traditional fixed income instruments. However, equities have historically produced the highest returns relative to other investment classes.* An investment portfolio containing a mix of stocks, bonds and cash is one way to diversify your investments and plan for your future goals.
Types of Stocks:
Blue Chip Stocks are stocks that are issued by large, well-established companies such as General Electric, IBM and Coca Cola. These stocks have long histories of financial growth, earnings and of paying consistent dividends.
Value Stocks are generally regarded to be underpriced compared to the relative financial strength of the company which they are issued by. Often the company has fallen out of favor for one reason or another, but continues to have solid financial earnings.
Growth Stocks are generally issued by companies with solid growth potential but have less of a track record of earnings success. Growth stock companies tend to have sales and earnings that are increasing faster than the average company, although they usually pay small or no dividends. Although these companies do not typically pay dividends, they do retain earnings and reinvest them in order to fund company expansion.
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