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Quick Start Guide To Stock Investing
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Photo credit: Ramy Majouji
In this series, we’ll look at each of the five asset classes you can include in your investment portfolio — and the advantages and disadvantages of investing in each one.
Investing in different asset classes offers you different growth opportunities and also helps to diversify your risk. For example, a housing crash might financially devastate you if you put ALL your money in real estate. But if you invested in stocks and bonds as well, you wouldn’t be as severely hit.
By definition there are three main asset classes – equities (stocks), fixed-income (bonds), and cash equivalents (money market instruments) – but many investment professionals would also include real estate and commodities into the mix.
Even though some assets might generate higher returns than others, no one asset class is “better” — each has its own set of advantages and disadvantages and serves a different purpose for an investor depending on individual goals and needs.
To kick things off this week, let’s look at the pros & cons of investing in stocks:
Equities (or stocks) are shares of ownership in a company, usually publicly traded. As a shareholder of a company, you get to enjoy a share of profits and see the value of your shares increase if the company is successful.
Many famous companies (like Apple, Disney, and Coca-Cola) are publicly traded, giving individual investors the opportunity to own a piece of these large and successful businesses. Besides large-cap stocks, investors can also invest in smaller companies with the potential to grow bigger in the future.
The Pros & Cons of Investing in Stocks
The Pros & Cons of Investing in Bonds
The Pros & Cons of Investing in the Money Market
The Pros & Cons of Investing in Real Estate
The Pros & Cons of Investing in Commodities