Financial Advice Blog

In order to determine whether you should invest in stocks, annuities, or both, it is important to understand each component and how they compliment each other in an investment portfolio.

With today’s stock market at an all-time low, some experts would recommend that this is a good opportunity to invest in stocks.  The “buy low, sell high” adage may yield positive results if you are willing to invest in the long term.

Conversely, some would also argue that annuities are a safer bet in today’s economy.  An annuity is an investment that yields a guaranteed payout.  There are two types of annuities:  fixed and variable. 

We've all heard about trading shares on the stock market. Investors often buy and sell stocks in an effort to turn a profit fairly quickly. They buy when prices are lower than normal, then sell when they rise. But this is only one of the ways to make money with stocks.

If you hold on to a stock rather than selling it, you have a chance to receive dividends. A dividend is a portion of the company's profits that is distributed to shareholders. Shareholders may receive dividends even when a stock's value goes down. As long as a corporation is financially healthy, shareholders can expect to receive dividends at regular intervals.

When a publicly owned company receives profits, it has two options. It can reinvest the money made, or it can distribute it to shareholders as dividends. Some companies reinvest all profits, and some distribute them all as dividends. But most companies do a combination of both. This way they retain the capacity for growth while offering shareholders the incentives they expect.

For those who work on Wall Street, stock trading is an everyday occurrence. For many of the rest of us, it is an enigma. It just seems so complex, especially when you don't have a clue what goes on behind the scenes.

Actually, stock trading isn't terribly difficult to understand. Here are the basics.

How Stocks Are Traded

The actual trading of stocks takes place at a stock exchange. The most familiar stock exchange for most Americans is the New York Stock Exchange. This is the place that we often see on the financial report on the news. It is full of traders working to facilitate smooth, quick transactions between buyers and sellers.

Some view putting money into stocks, bonds and other investments as nothing more than gambling. Others see it as a smart strategy for making your money work for you. Who's right? It depends on how you go about it.

It's no secret that practically all investments carry some degree of risk. Stocks can lose value, or their issuers could stop paying dividends. Bonds may not be repaid as agreed. That's why it's so important to thoroughly research any investment you make.

But some investors prefer to buy and sell attractive stocks in the hope that they will increase in value. If this works, it can bring them a nice sum of money in a short time frame. If it doesn't, they could lose big. Trading in this manner is known as speculating.