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Demystifying stocks

Investing through stocks, as complex as it can seem, doesn't have to be intimidating. In fact, building your investments through stocks comes with incredible potential. Deb Moon, ABFPTM, ADPATM, Financial Advisor, Edward Jones, told us more.

Before you begin investing in stocks, pinpoint your goals and motivations.

"What matters most to you? It's important that your investments are based on your needs, wants and wishes," Moon said. "Emergency savings, meeting monthly budget needs, saving for vacations or education, health care, caring for aging parents and planning for retirement are just a few of the goals to consider. Working with a financial advisor can help you get your thoughts in order and create a path to partner with you in setting attainable goals for allocating your money."

Many women also cite intimidation as a barrier to entry in this type of investing, though it doesn't have to be that way.

"Everyone wants to be in the right place at the right time, but that's easier said than done—especially when it comes to your investments," Moon said. "You may think you're being cautious or strategic, like switching lanes at the grocery store to move through the line faster. However, understanding your priorities and financial goals, weighing your comfort with investment risk and how long you want to invest for are great starting points."

According to the U.S. Securities and Exchange Commission, stocks are defined as a type of security that gives stockholders a share of ownership in a company, and are also called equities. Moon explains that stock owners are usually entitled to receive dividends and vote on important company matters, with common stocks usually being purchased for their appreciation potential and possible dividend income.

"Stocks have a long track record of providing higher returns than bonds or cash alternatives," Moon explained, noting that many companies pay dividends on a regular basis, most often quarterly. "Dividends can be used to supplement your income or may be reinvested to buy additional shares. Stocks that increase their dividends on a regular basis give you a pay raise to help balance the higher costs of living over time."

When you invest in stocks or stock mutual funds, Moon explains, you may experience more market volatility than more income-oriented investments, such as bonds or bond mutual funds, but that they can provide opportunities for higher returns.

"Stock prices can rise and fall for any number of reasons—lower than expected earnings, a change in management, changes in consumer tastes, and so on," she said. "Although the historical trend for stocks has been positive, there will always be periods when prices are down. One way to help defend against this volatility is to hold stocks for the long term, rather than constantly buying and selling, and to own a mix of stocks from different industries and even different countries."

According to Moon, identifying stocks to begin your investment journey starts with finding quality companies.

"Investing in quality companies at attractive prices is the best way for individual investors to build and acquire stock ownership over the long haul," she advised. "Quality companies share most, if not all, of the following characteristics: experienced management teams, a leadership position within its industry, a strong cash flow and a solid balance sheet."

Moon recommends looking for consistent growth in sales and earnings, and notes that a company which regularly pays a dividend and increases it over time tends to have a strong business model. Just remember: Dividends can be reduced or eliminated at any time, without warning.

Three of the most common investment mistakes Moon sees investors make include: Keeping money on the sidelines, reacting to market predictions and switching investments based on past performance.

"When investing, we recommend keeping the following in mind: Stock market declines are common, occur without warning and end unexpectedly. But they can also present opportunities for long-term investors to buy quality stocks," Moon shared, adding that you should avoid jumping into or out of the stock market. "We believe investing is about time in the market rather than timing the market."

With women being responsible for 85% of all household spending decisions, they're rewriting the rules of financial independence and embracing their journey on their own terms. Working with a financial advisor could be helpful in the process.

"We recommend finding an advisor who listens and understands your personal story and intricate details of your personal life, who brainstorms with you, who checks in with you—not just about your finances but also about your life events—and bases recommendations and guidance on your short- and long-term goals."

Written by Sarah Suydam, Managing Editor for West Michigan Woman.

This article originally appeared in the Apr/May '25 issue of West Michigan Woman.

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