LANSING, Mich. (WLNS) – Local money expert Stephen Schiestel breaks down what a stock is and if you should invest in it in this Money Monday.
Stocks are some of the riskiest securities, said Schiestel, more so than bonds or cash.
“A stock is nothing more than an ownership right in a business,” said Schiestel. “The stock is the equity the owners have after all other liabilities have been paid off.”
In the stock market, a stock represents a piece of a business.
“As that business continues to do great, or falters, our ownership interest will rise and fall based on the prospects of how that business is doing,” said Schiestel.
There are two main kinds of stocks: US stocks and international stocks
US stocks are categorized by size, from large caps to small cap stocks.
There are also growth oriented-stocks and value-oriented stocks.
“When we think of a growth-oriented large-cap, we think of Tesla, Amazon, Apple Peloton. Names that are moving and growing very fast, and their evaluations are a little stretched, but they are large, massive companies.”
If you have large investment goals, you’ll need to get into stocks, said Schiestel.
“If I have a retirement goal that I have an 8-10% long-term rate of return need to meet that goal, I’m going to have to embrace stocks,” said Schiestel.
“Risk and return are related. As I take more risk… I’m going to expect to get greater returns.”