The investment management and financial planning teams at Bell Investment Advisors have opened this conversation on our new blog to share relevant topics related to today’s financial world and our firm’s core strategy— Momentum for Life. Our purpose with this blog is to provide a more informal place for discussion and inquiry between us that builds on the educational series already available on our website. There we provide white papers and webinar programs; here we want to further expand on these and cover important topics such as education planning, retirement strategies, and surviving volatile markets.
Members of our team will also address educational topics ranging from an introduction to stocks, bonds, and investment strategies, to important questions to ask before you hire an investment advisor. Most importantly, we hope this will be a place where we can answer your questions and cover topics that interest you.
And now to get started, a quick introduction to the basics of stocks.
Five Quick Facts About Stocks:
1. Stocks represent ownership in companies.
2. Stockholders are owners not creditors, meaning stockowners have voting power and receive a share of earnings in the form of dividends.
3. Stocks have three sources of return: earnings growth, dividend payments, and changes in the market’s valuation of the company’s earnings.
4. There are different types of stocks: growth stocks emphasize future earnings while value stocks emphasize companies that are underappreciated by investors and trade at a discount to assets and/or earnings. There are dividend payers which tend to be mature companies with less growth potential and non-dividend payers which tend to be growing companies who prefer to retain all capital for reinvestment in the business. There are also market cap levels: large, medium and small, cyclical vs. defensive sectors as different sectors perform differently at various points in the business cycle (i.e. industrials vs. utilities), and foreign vs. domestic.
5. There are also risks involved in stock Investing. There is a business risk that companies could go out of business. Stocks could go to zero and wipe out one’s investment. There is an earnings risk based on the fact that earnings drive stock prices over the long-term. If earnings decline then stock prices do too. And there is the concept of volatility: although earnings drive stock prices in the long term, the emotions of market participants often drive them in the short term. Remember, stock prices fluctuate based on daily trading.
Leave us a comment and stay tuned to Momentum for more insight into today’s financial market from the team at Bell Investment Advisors.
What questions do you have about today’s financial market?