Investors Ed - Stocks

In this edition, we’ll take a look at stocks. A stock is a type of investment security that signifies ownership in a company. When you invest in a stock, you buy ownership shares in that company, also known as equity shares. The first common stock ever issued was by the Dutch East India Company in 1602. The U.S. stock market opens the trading day at 9:30 EST and closes at 4PM EST.

The success or failure of a company is directly related to your return on that investment. In other words, what you get back in relation to what you put in. There are 2 main ways to prosper from owning stocks. The first is by way of a dividend. Dividends are a payout or distribution to shareholders by a corporation from some of their earnings. Not all corporations pay a dividend. Many investors choose dividends as a portion of their income in retirement to replace some of their income they no longer receive from their jobs. The second way to possibly prosper from stock ownership is by way of capital gains. Since stocks are bought and sold throughout the trading session, the price of a stock changes constantly. When a stock is trading higher that the price you paid for it, you can sell it, therefore making a profit. This profit is considered a capital gain. Conversely, if you sell a stock at a price that is less than what you paid, you’ve then incurred a capital loss.

How well a company does has a direct effect on both dividends and capital gains and/or losses. Dividends resulting from a company’s earnings, capital gains resulting from how well the company does and investor demand. Strong demand by the investment community tends to move the stock price higher as investors feel that the company will have strong performance. Conversely, if a company isn’t profitable or investors are selling the stock, the price can go lower than what you originally paid for the stock. Stocks are also affected by the overall movement of the stock market as a whole and our economy. As with all investments, diversification and proper asset allocation is very important in a portfolio. That’s a topic I will discuss in the future. Well, I hope I’ve familiarized you with this brief session on stocks. If you have any questions regarding this material or care to have a onfidential discussion regarding your financial portfolio, please give me a call.

Well, that’s it for this edition of Investors Ed.

This is Frank Calderone from Raymond James, coming to you from my office in Armonk, New York.

Remember – Knowledge is Empowering !!!