Stocks 101: A Beginner’s Guide to Investing

Stocks are one of the most popular investing tools in the world, yet there is so much uncertainty surrounding them. If you don't know the purpose of stocks, or the different types of stocks available, don't worry. You are not alone.

Luckily, the financial advisors at American Investment Planners, LLC are here to offer their professional insight. Here are some of the stock market basics every investor should know:

What are stocks?

Stocks are an equity investment that represent partial ownership of a corporation. If a company is divided into 1,000 shares, and you own one of them, you effectively own 1/1,000th of that company.

What types of stocks exist?

There are two main types of stock, common and preferred.

• Common stocks: owners are entitled to vote and may (or may not) receive dividends.
• Preferred stocks: owners usually do not have voting rights, but have priority over common stockholders when it comes to dividends and asset liquidation.

Why do investors buy stocks?

There are many reasons why an investor may purchase a stock, but three of the most popular are:

• Capital appreciation: occurs when the stock rises in price, increasing the net worth of the owner’s portfolio. When a stock increases in value, the investor may look to sell it for a profit, or continue to hold onto it in hopes of continued success.
• Dividends: some companies regularly distribute their earnings to stockholders in the form of dividend payments. The more shares you own, the more money you will receive.
• Company control: stockholders have the ability to vote on management issues at annual shareholder’s meetings. The more shares you own, the greater your influence.

Want to get started investing?

Investing in stocks involves risks, including loss of principal. Before you take a plunge into the stock market, it’s a good idea to sit down with a qualified financial advisor and develop a sound investment strategy. The professionals at American Investment Planners, LLC have decades of experience, and will work with you to craft a plan that meets your needs, goals, and budget. To schedule a meeting with one of our consultants, please call (516) 932-5130 or email info@americaninvestmentplanners.com.