The Layman’s Guide to Stocks and Investing

Abstract

Stocks and dividends are a form of long-term investing strategy that allows money to grow using compounding interest.  Using the time value of money, a stock portfolio can grow to sizeable amounts over time.  A diversified portfolio made up of different types of stock and risk profiles can smooth out the volatility of owning individual stocks.  The greatest creator of wealth is the stock market, and the Standard & Poor 500 index has appreciated in value by 10% per year over the last few decades.  A portfolio made up of stocks and bonds provides both equity and debt financing, minimizing market risks.  An investment in both common stock and preferred stock gives a portfolio the protection and gains that grow exponentially over time.  Stocks can be either value stocks or growth stocks and this article will explain the difference between them and the risks that each carry.  When a company declares a dividend, the stockholder will receive a dividend for each share that is owned by the shareholder.