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Investing Basics

Investing Basics

| August 05, 2019
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Investing Basics

 

Saving and Investing Wisely
The first step in investing is to secure a strong financial foundation.

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Building on Your Foundation
Before you invest money, you should spend time setting your personal goals and considering your time horizon, risk tolerance, and liquidity needs.

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Types of Investments: Stocks
When you buy a company's stock, you're purchasing a share of ownership in that business. You become one of the company's stockholders or shareholders. Your percentage of ownership in a company also represents your share of the risks taken and profits generated by the company. If the company does well, your share of its earnings will be proportionate to how much of the company' s stock you own. The flip side, of course, is that your share of any loss will be similarly proportionate to your percentage of ownership.

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Types of Investments: Bonds
When you buy a bond, you're basically buying an IOU. Bonds, sometimes called fixed-income securities, are essentially loans to a corporation or governmental body. The borrower (the bond issuer) typically promises to pay the lender, or bondholder, regular interest payments until a certain date. At that point, the bond is said to have matured. When it reaches that maturity date, the full amount of the loan (the principal or face value) must be repaid.

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Types of Investments: Cash
In daily life, cash is all around you, as currency, bank balances, negotiable money orders, and checks. However, in investing, "cash" is also used to refer to so-called cash alternatives: investments that are considered safe and can be converted to cash quickly. Common cash alternatives include savings accounts, money market accounts, certificates of deposit, guaranteed investment contracts (GICs), government savings bonds, U.S. Treasury bills, Eurodollar certificates of deposit, commercial paper, and face amount certificates.

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Investing Through Mutual Funds and ETFs
You can invest in all three major asset classes through mutual funds, which pool your money with that of other investors. Each fund's manager selects specific securities to buy based on a stated investment strategy.

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Asset Allocation
The combination of investments you choose can be as important as your specific investments. The mix of various asset classes, such as stocks, bonds, and cash alternatives, account for most of the ups and downs of a portfolio's returns.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This communication is strictly intended for individuals residing in the state(s) of AL, AZ, CA, CO, CT, FL, GA, IL, IN, LA, ME, MD, MA, MI, MS, NE, NV, NH, NY, NC, OH, PA, RI, SC, TX, VT, VA and WA. No offers may be made or accepted from any resident outside the specific states referenced.

Prepared by Broadridge Advisor Solutions Copyright 2019.

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