Information on Stocks, Options and Bonds

Simply put, stocks are a way for you to own a part of a company. Bonds are a way for you to loan
money to a company, government or other organization.
When you buy shares of stock, you become one of the owners (a shareholder) and actually
own a part of the company that issued the stock. As one of the owners, you may experience
the following:
• Help choose the company’s leadership.
• Share in the company’s profits if it chooses to distribute periodic payments called
dividends.
• Have the potential for gain or loss if the value of the stock increases or decreases.
When you purchase a bond, you are essentially making a loan to the bond’s issuer. Bonds are
issued by companies, churches and federal, state and local governments. As a bondholder,
you may experience the following:
• Receive interest payments from the issuer of the bond.
• Receive the face value of the bond on its maturity date.
• Have the potential for gain or loss if the value of the bond increases or decreases.
Risk And Reward
Generally, the more risk an investor takes with a given investment, the greater the potential for
growth. Stocks are generally considered to be riskier than bonds because their value tends to
fluctuate more.
Every investment has some element of risk. The relatively low returns associated with an insured
bank savings account, for example, leaves the investor exposed to purchasing power risk. This is
the risk that the buying power of your assets will decline over time if your investment returns do
not equal or exceed the rate of inflation.