Building a secure financial future requires investing for long term growth.
Before investing in the stock market, it’s important to first define your financial goals and make a plan. With your long term goals defined, you can make better investment decisions. For example, do you want savings for a home, for college education for your children, or for retirement savings?
Stock investments are best for long-term investors. In return for potentially larger returns, the investor assumes a greater risk. Over a long periods of time, stocks will generally perform better than other investments, providing returns above the rate of inflation.
Stocks are liquid investments and can be purchased or sold on any business day at the current market value. You pay no capital gains tax earned on long-term stocks until the stocks are sold. In addition, if you lose money on a particular stock, you can deduct losses from your tax return (income tax laws vary, so speak with us or your accountant for specific details on the tax laws on your stock investments).
What is a stock?
Stocks, which are also known as shares, are portions of companies that you can buy – which means that you own part of the company. While you may own a part of a company, only those who have invested a lot of money into the company have any real say in how the company is managed.
There are two different types of stocks (or shares)
Preferred shares
Investors with preferred shares have a higher standing than investors holding common shares, but still have to get in line behind the creditors when it comes to how much of the company they own, or getting paid if the company goes out of business. In addition to having more of a say in the company decisions than those who have common shares, investors who have preferred shares often receive higher dividends.
Common shares
Investing in common shares brings a greater risk should the company close their doors. This is because creditors, bond holders and preferred shared holders have a higher rank than the common shareholders – having the first priority in receiving any return should the company go out of business.
Stock market investing requires a long term commitment. So before you invest, evaluate your current financial situation. Know how you are spending your money and what your needs are.
Our financial advisors can help you identify your financial goals and make an investment plan that suits your financial needs.
Question about stock investing?
Call:
Aurora Financial Services
(703) 652-7210
