What are stocks?

Stocks are financial instruments that let you hold an ownership stake in a publicly traded company. A stock you own gives you an effective claim on the earnings and assets of a company.

Stocks trade on financial markets. The price of a stock usually fluctuates throughout the trading day depending a number of factors such as economic sector news, geo-political developments, and company-specific news.

There are no guarantees with stocks, but our view is that, today, stocks are the better financial choice for most investors than bonds—even if you hold those stocks in financial instruments like ETFs, mutual funds and index funds.

In fact, we’d say the only investors who should hold significant quantities of bonds are those who simply cannot stomach the thought of sitting through a noticeable decline in the value of their portfolios. If you fall in that category and want to own bonds, our advice is to keep the maturities on your bonds below three years.

That way, a rise in interest rates, and/or a rise in inflation, can’t do too much harm to the value of your portfolio.

Understanding stocks and how they work the core of investing. Here at TSI Network, we thoroughly research stocks and how different stocks markets work. New investors—and established investors—should also consider using TSI Network as an investment resource and use our three-part Successful Investor strategy:

1. Invest mainly in well-established companies;
2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
3. Downplay or avoid stocks in the broker/media limelight.

Discover how to put extra strength into your portfolio with our specific advice on how to identify high-quality dividend stocks. It’s all in our newly updated report, Dividend Paying Stocks: How High Dividend Stocks Can Supercharge Your Income Investing. And it’s yours FREE!