Stocks & Bonds
Investing in stocks and bonds offers you the opportunity to capitalize on the success of a company by buying a share of it. As investments, stocks are exciting and potentially lucrative, but they are also risky. Bonds involve less risk—depending on the type you purchase—but the rewards might not be as great.
Stocks and bonds are two very different investment vehicles with distinct pros and cons. Based on your budget, goals, and tolerance for risk, you may choose one over the other, or you may decide to diversify your portfolio and invest in a combination of both. Your choices are broad, and your Financial Advisor can offer useful guidance about what makes sense for you.
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How stocks work
When you purchase a stock, you are buying a small portion of a company. When the company does well, your share goes up. If the company does poorly, your share goes down. The stock market is often unpredictable and there are no guarantees; however, your money has the potential to grow substantially.
Why should I buy stocks?
Risk and return
- Stocks offer the opportunity to receive higher rates of return, but they are risky.
Access to your money
- You can convert your shares into cash easily and frequently, often with minimal transaction fees.
Lots of choices
- When buying stocks, you have thousands of options in a wide variety of sectors and industries.
Stock investing includes risks, including fluctuating prices and loss of principal.
How bonds work
When you buy a bond, you are essentially making a loan to a company, organization, or the government. You’ll get your money back after a certain period of time, and you’ll also receive interest when the bond matures. Unlike stocks, bonds are fixed-income securities, meaning you know what you you’re going to get in return. Bonds issued by the U.S. government are guaranteed if you hold the bond until the time period is up; other bonds are not guaranteed and carry varying degrees of credit risk.
Why should I buy bonds?
Regular income
- You can elect to receive your bond payments regularly, and you can either live on that money or reinvest it.
Predictability and stability
- Although you won’t have access to your money while your bond is maturing, you’ll know upfront how much interest you’ll receive.
Tax-free income
- Depending on the type of bond you purchase, the interest you earn may be exempt from certain taxes.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk.
The benefits of investing with Wealth Management at Redstone Federal Credit Union
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