Stocks are a type of security that gives stockholders a share of ownership in a company. Stocks also are called “equities.”
Investing your money wisely is extremely important to achieving monetary success and attaining financial goals. Chances are, if you have, or are working on creating an investment strategy, it likely includes stocks or the highly popular ETFs.

There are two main types of stocks; common stock and preferred stock. Common stock entitles owners to vote at shareholder meetings and receive dividends.
Preferred stockholders usually don’t have voting rights but they receive dividend payments before common stockholders do, and have priority over common stockholders if the company goes bankrupt and its assets are liquidated.
Common and preferred stocks may fall into one or more of the following categories:

• Growth stocks have earnings growing at a faster rate than the market average. They rarely pay dividends and investors buy them in the hope of capital appreciation. A start-up technology company is likely to be a growth stock.
• Income stocks  pay dividends consistently. Investors buy them for the income they generate. An established utility company is likely to be an income stock.
• Value stocks have a low price-to-earnings (PE) ratio, meaning they are cheaper to buy than stocks with a higher PE. Value stocks may be growth or income stocks, and their low PE ratio may reflect the fact that they have fallen out of favor with investors for some reason. People buy value stocks in the hope that the market has overreacted and that the stock’s price will rebound.
• Blue-chip stocksare shares in large, well-known companies with a solid history of growth. They generally pay dividends.

Another way to categorize stocks is by the size of the company, as shown in its market capitalization. There are large-cap, mid-cap, and small-cap stocks. Shares in very small companies are sometimes called “microcap” stocks. The very lowest priced stocks are known as “penny stocks.” These companies may have little or no earnings. Penny stocks do not pay dividends and are highly speculative.

Stocks, historically, have usually offered investors the potential for growth (capital appreciation) over the long haul compared to other forms investments. Investors willing to stick with stocks over long periods of time, say 15 years, historically have been rewarded with  positive returns.

But stock prices move down as well as up. There’s no guarantee that the company whose stock you hold will grow and do well, so you can lose money you invest in stocks.

If a company goes bankrupt and its assets are liquidated, common stockholders are the last in line to share in the proceeds. The company’s bondholders will be paid first, then holders of preferred stock. If you are a common stockholder, you get whatever is left, which may be nothing.

Even when companies aren’t in danger of failing, their stock price may fluctuate up or down. Large company stocks as a group, for example, have lost money on average about one out of every three years. If you have to sell shares on a day when the stock price is below the price you paid for the shares, you will lose money on the sale.

Market fluctuations can be unnerving to some investors. A stock’s price can be affected by factors inside the company, such as a faulty product, or by events the company has no control over, such as political, market events and stock market pressure from similar company’s earnings reports.

Stocks have traditionally been are one part of an investor’s holdings. The risks of stock holdings can be offset in part by investing in a number of different stocks. Investing in other kinds of assets that are not stocks, such as bonds and ETFs, is another way to offset some of the risks of owning stocks.
read more Reasons ETFs Are Better Than Stocks

You can buy and sell stocks through:

• A direct stock plan
• A dividend reinvestment plan
• Broker
• A stock fund

Direct stock plans. Some companies allow you to buy or sell their stock directly through them without using a broker. This saves on commissions, but you may have to pay other fees to the plan, including if you transfer shares to a broker to sell them. Some companies limit direct stock plans to employees of the company or existing shareholders. Some require minimum amounts for purchases or account levels.

Direct stock plans usually will not allow you to buy or sell shares at a specific market price or at a specific time. Instead, the company will buy or sell shares for the plan at set times — such as daily, weekly, or monthly — and at an average market price. Depending on the plan, you may be able to automate your purchases and have the cost deducted automatically from your savings account.

Dividend reinvestment plans. These plans allow you to buy more shares of a stock you already own by reinvesting dividend payments into the company. You must sign an agreement with the company to have this done. Check with the company or your brokerage firm to see if you will be charged for this service.

Brokers buy and sell shares for customers for a fee, known as a commission.

Stock funds are another way to buy stocks. These are a type of mutual fund that invests primarily in stocks. Depending on its investment objective and policies, a stock fund may concentrate on a particular type of stock, such as blue chips, large-cap value stocks, or mid-cap growth stocks. Stock funds are offered by investment companies and can be purchased directly from them or through a broker or adviser.

Buying and selling stocks entails fees. A direct stock plan or a dividend reinvestment plan may charge you a fee for that service.  A discount brokerage charges lower commissions than what you would pay at a full-service brokerage. But generally you have to research and choose investments by yourself. A full-service brokerage costs more, but the higher commissions pay for investment advice based on that firm’s research.

When it comes to financial situations, everybody’s story is different. Investors have a plethora of information and investment choices at their finger tips. ETFs are relatively the new kid on the financial block but have quickly gained recognition as a must have investment vehicle.  There are some significant advantages to ETFs as compared to stocks and mutual funds for investors to consider.  read more »

ETFs are baskets of individual securities much like mutual funds but with two key differences. First, ETFs can be freely traded like stocks, while mutual fund transactions don’t occur until the market closes. Second, expense ratios tend to be lower than those of mutual funds because many ETFs are passively managed vehicles tied to an underlying index or market sector. Mutual funds, on the other hand, are more often active managed. Because actively managed mutual funds don’t commonly beat the performance of indices, ETFs arguably make a better alternative to actively managed, higher-cost mutual funds.

read more: Stock Market