Every day each of us comes one day closer to retirement. Can you survive for another 15-20 years on your pension or government benefits? Don’t bet on it. At the most, you will be reduced to one-third of your wages or salary unless you have prepared for this in advance. Not many people have done the preparation.
As more scientific discoveries are made, our life span increases. At the moment, an average life span is approximately 80 years. Many live beyond this, but your planning is for your survivors as well as for you. Your financial security is dependent upon your previous planning and the investments you have made for your portfolio. Those investments usually comprise stocks and bonds.
This brief article should provide you with basic knowledge of the things that you need to know about stocks. In about five minutes, you should be familiar enough to start the process of investing.
Stock investments give you some ownership in a company or corporation. This is called equity and you receive Certificate of Ownership in the company because you have “invested” your money in their business. Dividends based upon earnings of the company are paid to you on a specified schedule. You have the option of “reinvesting” to increase your ownership holdings or taking those payments as income to supplement social security or a pension.
Your stock investments might be a mix of common stock and preferred stock. Preferred stock will mean a higher investment of your money per share. In exchange, you are given a much higher priority when payments are made to stockholders. In the case of a company that closes or liquidates, you would be paid before the holders of common stock. However, you might not have any voting rights.
Common stock, however, places the owner at the bottom of the ladder for payments in the case of liquidation of the company. Everyone else gets paid before you. However, as the owner of this kind of stock, you do get voting rights when it comes time to elect a new Board of Directors or implement a company policy.
The New York Stock Exchange (NYSE), the American Stock Exchange (ASE) and NASDAQ are exchanges where stocks are traded on a daily basis. The exchanges are divided into the primary market and the secondary market.
When companies are approved for public trading, they offer an Initial Public Offering (IPO) within the primary market. The shares of established companies that are traded between individual investors represent the secondary market within an exchange.
Your stock should be bought and sold through a licensed broker who is qualified to place orders on the market. These brokers can be located in brokerage houses such as AG Edwards, Morgan Stanley, Merrill Lynch and others. These brokerage houses also employ financial planners who assist with your future financial security needs.
Since you do not pay any of these people, there is no reason to hesitate to use their services. Individual brokerage houses have hired them. Some receive commissions, others are salaried and some are paid a very basic salary as well as any of their earned commissions. However, it is important to do your own “due diligence” in finding the right person. Talk to a few of the professionals from different brokerage houses. This will bring you up to speed and help you to get the right “fit” – a personable professional to guide you with your fiscal decisions.
Financial analysts provide research information to the professionals who pass it along to you. These analysts work for the brokerage house, as well. The research that they gather is not always concrete, as markets can shift quite frequently and the information is only as good as the market allowed at a standstill moment in time. Overall, though, a diversified portfolio will balance most market fluctuations.
Discount brokers are available to submit your order to an exchange. You will get NO advice and you will pay for services rendered by this broker. These brokers are available in a business environment or online via the internet. Several of the better-known ones include: eTrade, AmeriTrade and ScotTrade. You place your order online at the website and the website is the discount broker executing your trade. You will pay a much smaller commission online; however, your destiny is truly in your own hands.
My last word: take care in choosing your pathway toward investment. Start young and be proactive in monitoring your account(s) to achieve the best return for your investment portfolio. Use a financial planner who is paid by the company without charging you every time your portfolio is adjusted. Commissions taken from your investments are likely to result in negative statement balances. Negative returns on your investments are not acceptable.
I hope this information proves valuable to you in the process of building your own financial security. It is now time to begin investing in your fut