Investment 101: What Are Stocks?

Chris Maurer |

The fact is that most Americans either don't save for retirement or they don't save enough. While reasons vary, one common reason our financial planners hear is that they just don't know or understand their investment and savings options. Saving in stocks, bonds, mutual funds, futures, and the like can be extremely daunting and overwhelming. 

Our financial advisors at Park Place Financial in Bellaire can help you understand all of your saving and investment options so that you can begin to build wealth for the future and plan for retirement. With years of experience, we can answer all of your questions, learn about your needs and wants, and set you on a path of success. Below, we'll introduce you to a great investment tool: stocks. Contact our wealth advisors today!

 

WHAT ARE STOCKS?

You can think of a stock as a tiny piece of a company. Stocks (also known as equity) is a security that represents a piece of a company that you buy into and own. This makes you an owner of a piece of their assets, and gives you the ability to profit when the company profits. Collectively, stocks are called shares. Thus, when you own stock in a company, you become a shareholder of that company. 

 

WHY INVEST IN STOCKS?

Stocks are a type of investment that can appreciate, or go up. That means if you purchase stocks and their price goes up, you've made money. Furthermore, some stocks pay dividends, which are payments made to shareholders that are part of the company's profits. These are usually paid on a quarterly basis.

The average long-term return on stocks is 10%, which, after inflation, is around seven or eight percent. This is a great rate of return. That being said, this is an average, and not all stocks post these gains. Thus, stocks are a type of investment that carries risk when you invest in them. Returns are not guaranteed. Stocks are bought and sold on stock exchanges primarily, and they are one of the best investments you can make for long-term growth versus rate of return.

 

ARE STOCKS RIGHT FOR YOU?

In most cases, owning some stocks in your overall portfolio of investments is prudent. Since stocks have a great track record for posting some of the best rates of return, having money in the stock market allows you to make those rates as well. However, when making money in the stock market, there are some key principles to keep in mind:

  • Investors who make the most money buy and hold stock for the long term. This means you choose stocks in companies that you think will grow in the future, you purchase the stock, and you hold onto it, no matter the daily, monthly, or even yearly fluctuations that are inherent with stocks.
  • You'll need to be patient. Many people get antsy when their stock falls. This is normal as market conditions can change that affect the value of stock. That being said, it's important to keep in mind that you haven't lost any money except on paper. You don't lose anything until you sell your stock. Odds are, the price will go up in the future.
  • Partner with a professional. There's no question that stocks and the stock market are difficult to understand. You should partner with a professional investment manager who is a registered investment advisor who can help you navigate this tricky world.

 

CHOOSE PARK PLACE FINANCIAL FOR YOUR INVESTMENT PLANNING NEEDS

The financial planners at Park Place Financial in Bellaire can help you with your investment planning needs. We customize every financial and investment plan to meet your particular goals and needs. When you partner with us, we'll sit down and understand your particular needs and wants when it comes to savings and investments, both for the long term and the short term. We'll create a diversified portfolio of stocks, bonds, cash, alternative investments, and more in order to meet your goals. This portfolio is balanced by your particular risk factor. We also consider the tax implications of your portfolio in order to maximize your ROI (return on investment) and save you money on taxes. Contact our investment company for a free analysis today!