AARP Financial

Stocks


Think of buying a stock as becoming a part owner in a company. As part owner, you have the opportunity to participate in a company's successes, as well as its failures. You also have the right to vote on members of the board of directors and other important matters that affect how the company is run.

Why own stocks?

As a shareholder, you could earn money in two possible ways:

  • Through distributions of a company's profits, called dividends;
  • From an increase in the share price, called price appreciation.

Larger companies tend to pay dividends quarterly, semiannually or annually. Often, shareholders can choose to receive cash payments or reinvest their dividends in additional shares of the company. Smaller companies tend to reinvest any earnings in order to stay competitive and may be less likely to pay regular dividends. However, smaller companies may offer more potential for price appreciation over time.



These articles are not meant to be a financial plan. A financial plan generally addresses a wide spectrum of financial needs including insurance, savings, investments, tax and estate planning.