PRODUCT

STOCKS

What are stocks?

A stock represents a share in the ownership of a company, including a claim on the company's earnings and assets. As such, stockholders are partial owners of the company. When the value of the business rises or falls, so does the value of the stock. Stocks are generally bought and sold electronically through stock exchanges, the two primary ones in the United States being the New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASDAQ). While some companies sell stock directly to investors, most only sell stock through a brokerage such as Schwab. Investors buy and sell stocks for a number of reasons including the potential to grow the value of their investment over time, to potentially profit from shorter-term stock price moves, or even to earn an income by investing in dividend-paying stocks. Keep in mind that the price of a stock can fall as easily as it can rise. Investing in stock offers no guarantee that you will make money, and many investors lose money instead.

How stocks fit within an overall investment portfolio.


Stocks are an important part of any portfolio because of their potential for growth and higher returns versus other investment products. In order to determine how much you should allocate to stocks, you should first develop a comprehensive financial plan that reflects your investment horizon and the level of risk you're willing to accept in exchange for the potential upside stocks can offer.

Asset classes perform differently, and it's nearly impossible to predict which asset class will perform best in a given year. If you had invested $100,000 in just U.S. Stocks in 1997, it would have almost quadrupled to $400,000 by 2017, but there would have been many ups and downs due to volatility. A more diversified investment portfolio would have had a lower return, but reduced volatility.

Types of stock


Learn about three main types of stocks, as well as some potential advantages and considerations.

Common stock Preferred stock American Depositary Receipts (ADRs)

Definition

A stock represents a share in the ownership of a company, including a claim on the company's earnings and assets. As such, stockholders are partial owners of the company.
Fractional shares of stock also represent ownership of a company, but at a size smaller than a full share of common stock.
Preferred stocks (or preferred securities) are hybrid investments that share characteristics of both stocks and bonds. They can offer higher yields than many traditional fixed income investments, but they come with different risks. Many non-U.S. companies, that would otherwise be unavailable or inconvenient to trade, do trade in the U.S. markets as ADRs (receipts for shares of the foreign stock issued by U.S. banks). They are denominated in U.S. dollars and pay dividends in U.S. dollars.

Advantages

Potential for higher long-term return. Voting rights (does not apply to owners of fractional shares). Liquidity depending on trading volume.
Dividends are typically higher and fixed. Share price experiences less volatility compared to common stock. Preferred shareholders are more likely to recover at least part of their investment if company goes bankrupt.
Local U.S.-based trading tends to be more liquid than local foreign markets. Investors may be able to access financial information more easily than if you invest directly overseas.

Considerations

Dividends, if available, are often lower, variable, and not guaranteed. Stock price and dividend may experience more volatility than preferred stock. More likely to lose investment if company goes bankrupt.
Lower long-term growth potential, if any. No voting rights in most cases. Generally less liquid than common stock.
Exposure to fluctuations in a foreign company's local currency could affect value of investment. Political or economic events in a foreign company's home country could potentially harm your investment.

Why invest in stocks with Venture Investment?


$0 online equity commissions


No one is lower than Schwab among E*TRADE, Fidelity, or Vanguard

Intuitive platforms


Trade stocks using our web, mobile, or advanced platforms.

Trading specialists


Get real-time trade analysis and focused support from investing professionals.

Premium research


Sharpen your instincts with actionable stock trading research and insights from Schwab and third parties.

Why trade stocks?

Stocks let you own a piece of a company’s future. They’re available for a wide variety of industries—so you can tap into your knowledge of specific businesses, or help you to diversify your portfolio.



Growth potential

While stock performance changes over time, successful stocks can help your money grow—at times, they can even outrun inflation



Income

Some stocks pay regular dividends—that’s income you can keep or reinvest



Flexibility

Since stocks trade by the millions every day, you can move quickly when you’re buying or selling



Control

You decide which company to invest in, when it’s time to buy, and when it’s time to sell



Fast facts

  • Stop and conditional orders may help protect your portfolio
  • The price-to-earning (P/E) ratio can help you identify value stocks
  • Compare earnings-per-share (EPS) between similar companies.
  • Market capitalization (market cap) is the dollar value of a company
  • Stock performance can fluctuate depending on market conditions

Top five dividend yielding stocks

WHAT IS A DIVIDEND?
A dividend is a payment made by a corporation to its stockholders, usually out of its profits. Dividends are typically paid regularly (e.g. quarterly) and made as a fixed amount per share of stock.
THE BASICS OF STOCK SELECTION
Selecting stocks for investing and trading should not be a guessing game in today's market. Join us as we review the basics of technical analysis and other stock selection techniques you should know before buying a stock.
WHAT TO KNOW BEFORE YOU BUY STOCKS
Placing a stock trade is about a lot more than pushing a button and entering your order. This brief video can help you prepare before you open a position and develop a plan for managing it.



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