Investment Types


When you invest in a stock, you become one of the owners of a corporation. Stocks represent ownership shares, also known as equity shares. Whether you make or lose money on a stock depends on the success or failure of the company, which type of stock you own, and what’s going on in the stock market overall and other factors.

Types of Stock

Common and Preferred Stock

You can buy two kinds of stock. All publicly traded companies issue common stock. Some companies also issue preferred stock, which exposes you to somewhat less risk of losing money, but also provides less potential for total return. Your total return includes any income you receive from an investment plus any change in its value.

If you hold common stock you’re in a position to share in the company’s success or feel the lack of it. The share price rises and falls all the time—sometimes by just a few cents and sometimes by several dollars—reflecting investor demand and the state of the markets. There are no price ceilings, so it’s possible for shares to double or triple or more over time—though they could also lose value. The issuing company may pay dividends, but it isn’t required to do so. If it does, the amount of the dividend isn’t guaranteed, and it could be cut or eliminated altogether—though companies may be reluctant to do either if they believe it will send a bad message about the company’s financial health.

Holders of preferred stock, on the other hand, are usually guaranteed a dividend payment and their dividends are always paid out before dividends on common stock. So if you’re investing mostly for income—in this case, dividends—preferred stock may be attractive. But, unlike common stock dividends, which may increase if the company’s profit rises, preferred dividends are fixed. In addition, the price of preferred stock doesn’t move as much as common stock prices. This means that while preferred stock doesn’t lose much value even during a downturn in the stock market, it doesn’t increase much either, even if the price of the common stock soars. So if you’re looking for capital gains, owning preferred stock may limit your potential profit.

Another point of difference between common stock and preferred stock has to do with what happens if the company fails. In that event, there’s a priority list for a company’s obligations, and obligations to preferred stockholders must be met before those to common stockholders. On the other hand, preferred stockholders are lower on the list of investors to be reimbursed than bondholders are.


A bond is a loan an investor makes to an organization in exchange for interest payments over a specified term plus repayment of principal at the bond’s maturity date. There are a wide variety of bonds including Treasuries, agency bonds, corporate bonds, municipal bonds and more. Likewise there are many types of bond mutual funds.

When you invest in bonds and bond mutual funds, you face the risk that your investment might lose money, especially if you bought an individual bond and want or need to sell it before it matures. And bond mutual fund prices can fluctuate, just as stock mutual funds do. Risk will also vary depending on the type of bond you own.

Whether you are just starting out or a seasoned investor, bonds and bond mutual funds often can be an important component of a diversified investment portfolio.

Investment Funds

Investment funds pool the money of many investors and invest according to a specific strategy. Funds come in various types, each with differing features. Generally, publicly-offered funds—such as mutual funds, exchange-traded funds, closed-end funds and unit investment trusts—must be registered with the Securities and Exchange Commission (SEC) as investment companies. Private investment funds (often called hedge funds) are often exempt from registration.

Funds can offer diversification and professional management—and they can provide feature a wide variety of investment strategies and styles. As with any security, investing in a fund involves risk, including the possibility that you may lose money. And how a fund performed in the past is not an indication of how it will perform in the future.

Some funds, such as hedge funds, do not unregister their shares with the SEC. This means they are not subject to the same regulatory standards that apply to mutual funds and other funds registered with the SEC.


An annuity is a contract between you and an insurance company in which the company promises to make periodic payments to you, starting immediately or at some future time. You buy an annuity either with a single payment or a series of payments called premiums.

Some annuity contracts provide a way to save for retirement. Others can turn your savings into a stream of retirement income. Still others do both. If you use an annuity as a savings vehicle and the insurance company delays your pay-out to the future, you have a deferred annuity. If you use the annuity to create a source of retirement income and your payments start right away, you have an immediate annuity.

The two most common types of annuities are fixed and variable. There is also a hybrid called an indexed annuity, also referred to as an equity-indexed annuity or a fixed-index annuity.

Annuities are often products investors consider when they plan for retirement—so it pays to understand them. They also are often marketed as tax-deferred savings products. Annuities come with a variety of fees and expenses, such as surrender charges, mortality and expense risk charges and administrative fees. Annuities also can have high commissions, reaching seven percent or more.

Saving for College

College funding begins with saving. But how much should you save—and how?

The College Board® reports that the average published tuition and fee price is 40 percent higher in 2015-16 at public four-year institutions than it was in 2005-06, with an average published cost of $9,410 for in-state students. That said, if college tuition and fees were to increase by 5 percent per year, in ten years you can expect to pay over $62,000 over four years at a public college, and considerably higher for four years at a private college.

While college costs continue to rise, the good news is that there are many smart, tax-advantaged ways to save for college. We’ll help you navigate your college savings options, and provide tips and tools to help you make a college education an affordable choice for you or your child.


Retirement Portfolio

Retirement income management is all about making sure your retirement savings provide enough income for your needs, and that you don’t outlive your assets. This starts with setting up and managing a portfolio that’s right for you.

The amount of money you have when you begin retirement is one of the most important factors in determining how to manage those assets during retirement.

If you have a large enough portfolio, it may generate enough income so that, with prudent spending, you never need to dip into your principal. If that is your situation, a combination of bank products such as CDs and Treasury bonds to preserve your principal, along with dividend-producing stocks and bonds may be the starting point for your investments in retirement.

On the other hand, if you’re like the majority of retirees, you’ll begin retirement with a more modest nest egg that will require you to tap your principal at some point. One important decision is how much to withdraw and from what account(s). Another is how much risk you want to incur, if any, in an attempt to grow your nest egg. You will also want to take into account whether your spouse is still working and how long it will be before he or she retires.

Unfortunately, there are no easy answers or fail-safe ways to manage any investment portfolio. But there are some helpful concepts and general guidelines that can help you decide what is best for you, and also avoid serious mistakes that can jeopardize your financial well-being.

Contact us if you would like a complete breakdown of all types of investment products offered by Hamilton and Jacobs.



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