Stocks can help contribute long-term growth towards your financial goal. History has repeatedly demonstrated that stocks, as a portfolio asset, have outperformed every other type of investment over periods of time. Stock investing involves risk including loss of principal. Past performance is no guarantee of future results.
A share of stock is the smallest unit of ownership in a company. If you own a share of a company’s stock, you are a part owner of the company. You have the right to vote on members of the board of directors and other important matters before the company. If the company distributes profits to shareholders, you will likely receive a proportionate share.
After the initial public offering, it is the buying and selling of stock by investors that determine the stock price. A stock quote is the price paid at the stock’s most recent purchase. Blue Chip companies will have stock prices change many times a day, whereas thinly traded stocks (stocks with less trading activity) may change in price as seldom as weekly.
It is very important that you do research on the company stock you plan to invest. You should know its products, services, market, as well as what analysts predict in earnings for the company’s future.
In addition to common stocks, corporations may also issue preferred stock, which represents a class of ownership with a stated dividend that must be paid before dividends are paid to common stock holders. Preferred stock does not usually have voting rights but preferred stock holders have priority over common stockholders on earnings and assets in the event of liquidation.
General risks inherent to investments in stocks include the fluctuation of market prices and dividend, loss of principal, market price at sell may be more or less than initial cost and potential illiquidity of the investment in a falling market.
Purchasers of preferred stock should be aware of the risks of such investments, including a limited market and call risk.