You have a dream, but you’re not sure how to fulfill it. Whether you want a cozy retirement home, a classic automobile, or a secure retirement, investing in stocks and mutual funds can help you achieve your long-term goals. But, if you’re an inexperienced investor, the job can be intimidating. Here are a few of the basics that will help you understand what stocks and mutual funds* are all about.
A Piece of the Pie
Stocks are simply shares or pieces of ownership in a company. By purchasing stock, you become an owner in the company. You’ll generally make money if the company is successful and its share price increases. You’ll lose money if you sell your shares at a lower price than you paid. Many companies pay out some of their profits to shareholders as dividends.
A mutual fund purchases various securities, such as stocks or bonds, with money it raises from selling fund shares to investors. You make money when the fund distributes income and gains to you or when you redeem your shares for more than you paid for them. You can lose money if the value of the fund’s portfolio drops.
Understand the Risks
As you can see, both stocks and mutual funds can boost any savings program, but they do carry risks. There’s no guarantee that you’ll receive back the full value of your original investment when you sell or redeem your shares.
You’ll have many choices when you sit down to select a fund or an individual security for your portfolio. International, large-cap, mid-cap, and technology — these are just some of the equity styles that could help you meet your goals. But each carries different risks and potential rewards that you’ll want to know about before investing.
*Mutual funds are sold by prospectus, which includes information on charges, expenses, and risks. To receive a current prospectus, please contact your registered representative. Please read the prospectus carefully before you invest or send money.