Assessing the risks and potential rewards that can come with investing in stocks and bonds is much easier with experienced guidance. Cedar Point Financial Services can help you in determining which options match your investor profile, goals, timeline and acceptable risk.
Stocks are equity investments. When you purchase a share of stock, you become a partial owner of that company—a stockholder or shareholder. Stock ownership allows you to share in any profits and growth in the company.
Generally, investors purchase stock for growth and income. Stocks offer the potential to increase in value and outpace inflation. While the stock market tends rise in value, the prices of individual stocks rise and fall daily. Some stocks also pay dividends providing regular income to help fund a retirement or pay for more investing to grow your portfolio. There are two main types of stocks:
Though stocks have historically performed well over the long term, there's no guarantee that stocks will produce higher returns or any returns on your investment. Understanding the factors contributing to the risk will assist you in making sound investment decisions. Here are some factors to be aware of:
Bonds are debt securities similar to an I.O.U. When you buy a bond, your purchase is in essence loaning money to a bond issuer. In return for your investment you receive regular interest payments, usually based on a fixed annual rate, until the stated maturity date. Bonds are affected by interest rates, meaning the price of bonds can increase or decrease based on current interest rates. At maturity, you are paid the bond's full-face amount.
Investors purchase bonds for income, safety and diversification. Bonds usually pay interest semiannually, providing a predictable income stream. If bonds are held to maturity, bondholders get back the entire principal. Even though bonds aren't risk-free, they tend to be less volatile than stocks and can offer portfolio stability when the stock market is struggling. It is also possible to lose amounts if a company were to go bankrupt. High yield bonds can be riskier than most stock so it’s important to talk to a qualified adviser to assess all risks.
If you've maxed out your Individual Retirement Account (IRA) and employer-sponsored plan contribution, then an annuity may be a good option to help round out your portfolio. It is important to insure the financial strength of a company when looking at an annuity.
What is an Annuity?
An annuity is an insurance contract designed to provide retirement income. Annuities have two phases:
There are typically two options with annuity investments:
Annuity Investment Types
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Diversification is a fundamental principle of investing means not putting all your eggs in one basket.
Putting together a portfolio of individual stocks and bonds can be daunting and knowing what and when to buy can be difficult. Mutual funds allow you to invest in several different securities at once, often at a lower cost than if you had purchased the stocks and bonds on your own. By investing in the fund, you own shares of the fund which, in turn, owns shares of individual securities.
The most common types of mutual funds are:
While mutual funds may lose money and do not guarantee a profit, mutual funds may offer a more stable investment option when compared to individual stocks. The price of shares can change daily, and when you sell, you'll receive the value of your shares at that point in time, which may be more or less than what you paid.
A few investment benefits of mutual fund investments:
Choosing a Fund
Choosing a mutual fund requires careful consideration involving a number of factors, such as your investment objectives, risk tolerance and time horizon. We encourage you to work with a Cedar Point Financial Services representative to select and invest.
Include Investment Disclaimer
Please fill out this form to begin your planning consultation with a CPFS representative. Alternatively, you can call with any questions about our firm or the range of financial products and services we provide.