Wealth &
Protection Planning

Stocks

An investment in a stock represents ownership in a corporation.  A share of stock entitles the shareholder to vote in the election of directors, as well as other matters affecting the company at shareholder meetings.  Along with voting rights, shares of stock also entitle the shareholder to a portion of the company's earnings, usually paid in the form of dividends.  However, if a company fails, the shareholder can lose up to the entire value of his investment. 

There are two basic types of stock: common and preferred.  Common stock entitles shareholders to all voting rights of the company, as well as to any excess earnings or dividends, if any.  There are no guarantees with common stock.  Preferred stock does have a guaranteed dividend, but has limited voting rights.  The yield of the dividend will vary contingent of the price of the common or preferred stock.  With both types of stock, dividend payouts are one way the shareholder can gain value. 

Shareholders can also gain value through the increased market price of the individual shares.  The market value of a stock is directly determined by the demand placed on it by other investors.  This demand is indirectly related to the profitability of the company.  To profit from stocks, an investor should look for companies that either are growing and profitable, or have the potential to do so.  Over the long term, these are the companies that can provide the investor with growth. 

Contact a STRIVE Wealth Advisor for more information about stocks. 

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