What Is a Stock?

When you buy a stock, you're buying a small piece – or a share – of a company. Stocks are sometimes called "equities" because shareholders have equity (meaning ownership) in the company. We believe stocks, and the mutual funds that own them, are an important part of almost any investment strategy. As a stock investor, there are two basic ways you can make money:

  1. Capital Gains – The first way stock investors make money is through growth or capital gains. This means that if the stock price goes up, your shares are worth more. So if you sell them for more than you paid for them, you keep the difference, which is referred to as a capital gain. The price of a stock goes up and down, so if you sell your shares for less than what you paid for them, then the result would be a capital loss.
  2. Dividends – The second is by receiving a dividend from the company. Dividends are simply a little piece of the company's profits, typically paid quarterly. Companies don't have to pay dividends to their shareholders, but many times they do. It's important to note that even companies that have historically paid a dividend can stop at any time.

The Role of Stocks

Stocks can play an important role in your portfolio for a variety of reasons, including:

  • Current or future income needs
  • Potential for growth of principle and accumulation of wealth
  • Potential for offsetting inflation

So Many Choices, But We Can Help

With more than 65,000 stocks available around the world, it can be difficult to choose what's right for you. Your financial advisor can help you decide.

Important Information

Investing in equities involves risks. The value of your shares will fluctuate and you may lose principal.

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