An overarching principle to remember in investing is time.
Stocks: Represented by terms like equities, Dow Jones, S&P 500, stocks enable clients to purchase a stake in a company, thereby gaining partial ownership. The anticipation is that the company will appreciate in value, leading to price increments. Additionally, as shareholders, they may receive a share of profits in the form of dividends. Most stocks are traded on stock exchanges such as NYSE or NASDAQ.
Bonds: Known as fixed, treasuries, notes, bonds, allow clients to lend money to corporations or government entities, ranging from local governments to the federal government. Typically, bonds offer a yield (interest rate) and exhibit lower volatility compared to stocks. Unlike stocks, bonds are not traded on exchanges, making individual trading more complex.
Mutual Funds: Comprising groups of stocks, bonds or a combination thereof, mutual funds offer a convenient avenue for small investors to own a diversified portfolio without purchasing individual securities. Index funds, mirroring the performance of stock and/or bond averages like the S&P 500, are also prevalent.
ETFs (Exchange Traded Funds): Similar to mutual funds but tradable like stocks, ETFs provide clients with diversified exposure while offering ease of trading on stock exchanges. ETFs, like mutual funds, can be either actively managed or indexed.
Others: Various other investment types exist, including REITs (real estate), Futures, TIPS, Hedge Funds, and Limited Partnerships, each carrying distinct rules and risks.
These options serve as a comprehensive toolkit for financial advisors and their clients to devise an investment strategy tailored to factors such as risk tolerance, time horizon and income requirements.
Two crucial elements in formulating a plan are:
Diversification: Spreading investments across multiple assets prevents overexposure to any single stock or sector, thus mitigating risk.
Yield: Particularly vital for retirees, yield in the form of interest and/or dividends ensures a source of income post-retirement.
An overarching principle to remember in investing is time. While markets may fluctuate unpredictably in the short term, a well-structured plan typically yields consistent returns over time. Attempting to time the market or individual stocks is inherently risky, but maintaining a disciplined investment approach aligned with an appropriate portfolio usually leads to achieving investment objectives. QCBN
By Steve Schott
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Schott Financial Management are not affiliated. These are the opinions of Stephen Schott and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The information in this email is confidential and is intended solely for the addressee. If you are not the intended addressee and have received this email in error, please reply to the sender to inform them of this fact. We cannot accept trade orders through email. Important letters, email, or fax messages should be confirmed by calling 928 776-1031. This email service may not be monitored every day, or after normal business hours. Indices mentioned are unmanaged and cannot be invested into directly. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The Nasdaq 100 Index is a basket of the 100 largest, most actively traded U.S. companies listed on the Nasdaq stock exchange. The index includes companies from various industries except for the financial industry, like commercial and investment banks. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Diversification and asset allocation strategies do not assure profit or protect against loss.
Steve Schott has been a financial advisor since 2010. His expertise in business ownership and capital management spans banking, office products, office machines and autos. A former owner of Prescott Honda, Steve holds an MBA from the University of Arizona and a Bachelor of Science in Finance from The University of Denver. Steve is a proud graduate of Prescott High School and an avid community volunteer. Steve purchased Tomlinson Wealth Management from its predecessor, Andy Tomlinson, in 2019, making Schott Financial Management a 3rd generation financial firm in Prescott, AZ. Schott Financial Management is licensed in over 30 states.
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