Published: Wed, 23 Sep 2020 18:15:23 +0000
Market Blog In the recent LPL Market Signals video, LPL Financial Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder celebrate the 100th episode of this client-approved podcast, along with putting the recent stock market weakness in perspective and … Continue reading →
Published: Wed, 23 Sep 2020 15:58:14 +0000
Market Blog On March 23, 2020, the S&P 500 Index closed down 2.9% for the day, bringing its total loss from its all-time high to 33.9%. The index was in the midst of its fastest bear market ever. A day … Continue reading →
Published: Wed, 23 Sep 2020 14:58:11 +0000
Daily Insights Markets rebounded Tuesday. A tumultuous September for equities caused bargain hunters to take advantage of oversold conditions Tuesday, snapping a four-day losing streak for the S&P 500 Index. House Democrats and the White House reached a tentative deal … Continue reading →
Published: Tue, 22 Sep 2020 15:59:06 +0000
Market Blog A few weeks ago we looked at how different bond sectors performed during rising rate periods during the last economic cycle (2009–2020). Today we look at falling rate periods—not the outcome we expect, but it can still be … Continue reading →
Published: Tue, 22 Sep 2020 14:58:14 +0000
Daily Insights S&P 500 extends sell-off. Despite a strong rally in the final hour of trading, the S&P 500 Index extended its recent sell-off to open the week. As of Monday’s close, the index is now a little over 8% … Continue reading →
Published: Mon, 21 Sep 2020 18:15:00 +0000
Economic Blog We check in again today on some of the real-time economic data that LPL Research is monitoring to provide timely and valuable insights into the state of the US economy. Traditional economic data is often reported too slowly … Continue reading →
Published: Mon, 21 Sep 2020 14:58:12 +0000
Daily Insights Pullback continues. Stocks opened lower this morning as the S&P 500 Index attempts to break its three-week losing streak that has left it more than 7% below its September 2 high. Political uncertainty following Justice Ruth Bader Ginsberg’s … Continue reading →
Published: Fri, 18 Sep 2020 20:14:25 +0000
Weekly Market Performance – September 18, 2020: Markets Show Resilience Market Blog Index Performance S&P 500 Index: -0.6% Dow Jones Industrial Average: 0.0% Nasdaq Composite: -0.6% US and International Equities The equity markets attempted to gain marginal ground this … Continue reading →
Published: Fri, 18 Sep 2020 15:58:50 +0000
Market Blog One of the top requests we’ve received the past few weeks is for more charts on the US elections. We shared some of our favorite in Election Charts You Need to See: Part 1 and Part 2, and … Continue reading →
Published: Fri, 18 Sep 2020 15:06:11 +0000
Daily Insights TGIF. Stocks opened flat on an extremely light news day. Investors continued to digest the Federal Reserve’s decision from Wednesday and an influx of economic data. The S&P 500 Index is trying to avoid its first three-week losing … Continue reading →
Published: Thu, 17 Sep 2020 15:59:04 +0000
Market Blog At LPL Focus 2020, LPL Financial Chief Investment Officer Burt White and Chief Market Strategist Ryan Detrick sat around the campfire to discuss 2020 so far, what could be in store for the rest of 2020, and more, … Continue reading →
Published: Thu, 17 Sep 2020 14:59:49 +0000
Daily Insights Stocks opened lower. The late-session selling after the Federal Reserve (Fed) announcement Wednesday is spilling over this morning. Markets got a dovish Fed but seemed to want more, which is dampening enthusiasm for traders. Global markets are broadly … Continue reading →
Published: Wed, 16 Sep 2020 15:58:42 +0000
Economic Blog Retail sales rose 0.6% month over month in August following July’s downwardly revised 0.9% advance, but sales fell short of Bloomberg’s consensus expectation for a 1% increase. The retail sales control group, which excludes building materials, autos, and … Continue reading →
Published: Wed, 16 Sep 2020 14:59:36 +0000
Daily Insights Markets opened higher. US equities have continued their recent strength this week on the heels of the first two-week losing streak in nearly five months. Today the big news is the Federal Reserve (Fed) meeting, as all eyes … Continue reading →
Published: Wed, 16 Sep 2020 14:21:22 +0000
Market Blog In the recent LPL Market Signals video, LPL Financial Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discuss the recent two-week losing streak for stocks and more, including: The fastest correction ever for the Nasdaq—and why … Continue reading →
Published: Tue, 15 Sep 2020 18:29:05 +0000
Economic Blog The US Federal Reserve (Fed) and Bank of Japan (BoJ) both meet this week, while the European Central Bank (ECB) met last week. When central bankers talk— markets listen. “The global economy has been steadying faster than many … Continue reading →
Published: Tue, 15 Sep 2020 14:58:20 +0000
Daily Insights Global stocks look to rally. Most major Asian indexes were higher overnight following strong data on Chinese industrial activity and retail sales, although Japan’s Nikkei lagged. The Euro Stoxx 600 is higher at midday. The S&P 500 Index … Continue reading →
Published: Mon, 14 Sep 2020 15:58:23 +0000
Market Blog As we noted last week, the demand for election charts is off the charts (pun intended), so we are sharing some of our favorite election charts. Without further ado, here are some more election charts you need to … Continue reading →
Published: Mon, 14 Sep 2020 14:58:49 +0000
Daily Insights Stocks opened solidly higher. Stocks are getting back a chunk of last week’s losses this morning, led by technology and boosted by vaccine optimism. It’s “Merger Monday” with large deals announced in the semiconductor and biotech industries, along … Continue reading →
Published: Fri, 11 Sep 2020 19:59:38 +0000
Market Blog Index Performance S&P 500 Index:-2.4% Dow Jones Industrial Average: -1.7% Nasdaq Composite: -4.0% US and International Equities During this shortened trading week, the equity markets sold off following a strong summer advance. While continued losses in the … Continue reading →
Published: Fri, 11 Sep 2020 15:58:58 +0000
Market Blog First off, our thoughts go out to everyone who was impacted by the tragic events of September 11, 2001—19 years ago today. It is a day to reflect and remember those who were lost. One of the top … Continue reading →
Published: Fri, 11 Sep 2020 14:58:15 +0000
Daily Insights On this day we remember those whose lives were lost in the tragic events of September 11, 2001. We will never forget. Markets moving higher. US markets opened higher following Thursday’s steep sell-off. Stocks are looking to end … Continue reading →
Published: Thu, 10 Sep 2020 17:38:19 +0000
Economic Blog With everything else going on this year due to COVID-19, it’s been easy to lose track of the latest fallout of the United Kingdom’s (UK) withdrawal from the European Union (EU), also known as Brexit. The UK is … Continue reading →
Published: Thu, 10 Sep 2020 14:59:03 +0000
Daily Insights Stocks opened higher after reversing earlier losses. European markets are slightly lower in midday trading after the European Central Bank left policy unchanged. Asian markets finished mixed—China’s Shanghai Composite and Hong Kong’s Hang Seng closed lower, while Japan’s … Continue reading →
Published: Wed, 09 Sep 2020 15:58:50 +0000
Economic Blog While the direction of the 10-year Treasury yield over the last cycle was decidedly lower, as shown in LPL’s Chart of the Day, there were still six extended periods where it rose at least 0.75%, and in two … Continue reading →
Published: Wed, 09 Sep 2020 14:58:06 +0000
DAILY INSIGHTS Equity markets rebound. US stocks opened solidly higher this morning to rebound from Tuesday’s sell-off. The outsized summer advance after the best August in over 30 years, still-elevated COVID-19 infections, US-China tensions, and skepticism concerning the economic rebound … Continue reading →
Published: Tue, 08 Sep 2020 15:58:28 +0000
Economic Blog In the recent LPL Market Street View video, LPL Financial’s Chief Market Strategist Ryan Detrick discusses why the recession is likely over, making it one of the shortest recessions ever. Some reasons discussed include: Historically, new stock market … Continue reading →
Published: Tue, 08 Sep 2020 14:58:27 +0000
DAILY INSIGHTS Tech weakness weighing on US markets early. The S&P 500 Index opened lower after the long holiday weekend as concerns about valuations and a shift in sentiment continued to weigh on some tech-oriented names. Similar concerns sent most … Continue reading →
Published: Mon, 07 Sep 2020 19:54:03 +0000
This week in the LPL Market Signals podcast, LPL Financial’s Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discuss the impacts of a potential President Trump second term. They also discuss: The historic August bounce Can the strength … Continue reading →
Published: Fri, 04 Sep 2020 20:03:42 +0000
Market Blog Index Performance S&P 500 Index: -2.3% Dow Jones Industrial Average: -1.8% Nasdaq Composite: -3.3% US and International Equities The equity markets sold off this week after a strong summer advance. Technology stocks, the year’s best-performing sector, led the … Continue reading →
Published: Fri, 04 Sep 2020 16:02:31 +0000
Economic Blog The jobs market remains strong, as the August nonfarm payrolls came in at a solid 1.37 million jobs created, right in line with expectations. This was the fourth consecutive month of gains, up 10.6 million over this time … Continue reading →
Published: Fri, 04 Sep 2020 15:09:01 +0000
DAILY INSIGHTS The day after. Stocks opened mixed after today’s report of 1.4 million jobs created (more on this below). Following one of the worst performing days in months on Thursday, conversation swirls around whether this is finally the well-deserved … Continue reading →
Published: Thu, 03 Sep 2020 15:58:14 +0000
Economic Blog The outbreak of COVID-19 caused considerable deterioration in the economy and left many wondering when we might expect conditions to improve. As historic stimulus measures were implemented to backstop the economy from outright collapse, many also wondered if … Continue reading →
Published: Thu, 03 Sep 2020 14:58:37 +0000
DAILY INSIGHTS Stocks opened lower. The S&P 500 Index opened lower this morning after a strong start to September, historically a seasonally weak month. Better than expected jobless claims were released this morning, and the much-anticipated monthly jobs report will … Continue reading →
Published: Wed, 02 Sep 2020 15:58:00 +0000
Market Blog The S&P 500 Index just closed the door on its best August since 1986, making new all-time highs along the way, while also closing up five months in a row. First things first, make no mistake about it; … Continue reading →
Published: Wed, 02 Sep 2020 14:59:11 +0000
DAILY INSIGHTS Markets Continuing Run Higher. US stocks opened higher after another solid performance and round of new highs Tuesday. Growth once again outperformed value, but the story of the day was an upside surprise in August US manufacturing numbers (more … Continue reading →
Published: Tue, 01 Sep 2020 15:58:11 +0000
Economic Blog Federal Reserve (Fed) Chair Jerome Powell gave a significant speech at the annual central bank symposium at Jackson Hole last week in which he laid out the general conclusions of the Fed’s review of its Statement on Longer-Run … Continue reading →
Published: Tue, 01 Sep 2020 14:58:32 +0000
DAILY INSIGHTS Markets mostly higher. The S&P 500 Index and Nasdaq opened higher after a mixed close on Monday, with the Nasdaq making yet another new high. The S&P 500’s lower close broke a seven-day win streak and six consecutive … Continue reading →
Published: Mon, 31 Aug 2020 14:58:08 +0000
DAILY INSIGHTS Stocks opened slightly lower. The S&P 500 Index will try for another record high and its eighth-straight up day as an unusually strong month of August comes to a close. Market participants remain focused on current market influencers: … Continue reading →
Published: Mon, 31 Aug 2020 14:00:37 +0000
Market Blog What a month August has been so far, with the S&P 500 Index up more than 7%, for the best August since 1984. Not to be outdone, this is the first time in history August saw two separate … Continue reading →
A stock represents a share of ownership in a business. When you hold one or more shares of stock in a company, you actually own a piece of that company. Your percentage of ownership will depend on how many shares you hold in relation to the total number of shares issued by the company. Investors who purchase stock are known as the company's stockholders or shareholders. The price of shares reflects the public's level of interest in owning the shares. If a lot of investors want to buy shares, they bid against one another, driving up the market price of the stock. If interest is low, competing bids are few and far between, and the price of shares is likely to fall. You may hold the stock in the form of a stock certificate, which identifies you as the owner of the stock and the number of shares you own. Alternatively, shares may be held in an account with a brokerage firm.
Your percentage of ownership in a company represents your share of the risks taken and profits generated by the company. If the company does well, your share of the total earnings will be proportionate to how much of the company's stock you own. The flip side, of course, is that your share of any loss will be similarly proportionate to your percentage of ownership, though you are not personally financially responsible for any share of the liabilities of the company in which you hold an equity interest. Beyond that, depending on the company and the types of shares you have, stock ownership may carry other benefits. Specifically, you may be entitled to dividend payments (which you can generally receive either in cash or additional shares), capital gains payouts, voting rights, and other corporate privileges. For example, common stockholders have the right to vote for candidates for the board of directors and on other important issues.
From the standpoint of the company, issuing and selling stock enables it to raise capital needed to expand, conduct research, modernize, pay off creditors, and meet other corporate expenses. When you give a company capital by buying its shares, you acquire equity in that company. Just as your equity in a home represents the portion that you actually own relative to the amount you owe on the mortgage, equity in a company represents your ownership stake. That's why stocks are sometimes referred to as equities.
Many investors never venture beyond the world of cash alternatives--bank accounts, CDs, money market accounts, and Treasury bills. They take comfort in knowing that these investment vehicles provide relative safety coupled with liquidity that allows them to access their money easily if they need it. However, while these investments are relatively low risk, they generally yield minimal returns; some may not even keep pace with inflation. At some point, most investors want the potential for greater returns, which is where stocks enter the picture. A variety of factors motivate people to invest in stocks. Many view equity investments as an opportunity to accumulate wealth or to prevent inflation from eventually reducing the purchasing power of their money. They generally take a long-term view, hoping their stocks will appreciate in value over time. They may also be interested in the dividends that some stocks pay, which shareholders may accept in cash or (in some cases) reinvest in additional shares of the company. Dividends and any increases or drops in the stock's price combine to produce the stock's total return. Investors with a gambler mentality may be attracted by the thrill of playing the market. They may trade actively, sometimes buying and selling the same issue within a few days or a few hours. These day traders try to take advantage of small, intra-day price movements in volatile stocks or indexes.
Investors who purchase stock hope to make money in one of two ways--through dividend payments and/or capital gains.
Some investors buy stocks because they seek regular income from dividends. Dividends represent distributions of corporate earnings to shareholders. The company's board of directors decides whether to distribute a dividend to shareholders; payment of a dividend is by no means mandatory. Dividends, if distributed, are usually paid out to investors in cash. However, a company may also pay dividends in the form of additional stock, known as stock dividends, or in property (this is rare). Some companies allow investors to buy stock through an automatic dividend reinvestment plan. A brokerage commission may or may not apply. Qualifying dividends received by an individual shareholder from domestic corporations (and qualified foreign corporations) are taxed at long-term capital gains tax rates, making dividends more attractive to many investors. As of January 1, 2013, those rates range from 0% for individuals in the 10% and 15% marginal income tax brackets to 20% for individuals in the highest marginal tax bracket of 39.6%. In addition, a 3.8% Medicare contribution tax applies to the investment income (including qualified dividends) of individuals with income that exceeds $200,000 ($250,000 for married couples filing jointly). Not all stock dividends qualify for capital gains tax treatment. Dividends that are ineligible will be taxed at ordinary income tax rates. These include:
Further, dividends paid on hybrid preferred stock (i.e., stock that is reported as debt) are also ineligible for capital gains tax treatment.
Capital gains represent increases in stock prices. Investors looking for capital gains hope to buy a company's stock at a low price and sell it when the price has risen. Stock prices can increase for many reasons, including company profitability, a good economic environment, or rumors of a takeover. Conversely, stock prices may decline for many reasons, including poor earnings reports, poor management, lawsuits, faulty or out-of-date products, competition, bad publicity, or an overall poor economy. Prices also can be affected simply by the investment community's view of the stock market as a whole. Capital gains from selling stock result in taxable income; however, such gains, if long term, will generally be taxed at a lower rate than ordinary income tax rates, as was discussed above in connection with dividends. Also, in any given year, any capital loss you sustain can be used at tax time to offset capital gains. Finally, if unused capital losses remain, they can be used to offset up to $3,000 ($1,500 if married filing separately) of ordinary income for that year or can be carried forward to future years. Caution: Capital losses cannot be used to offset dividend income taxed at long-term capital gains rates.
The decision to invest in stocks is a personal one that should depend on your individual situation. Before taking this step, and before selecting specific types of stocks to add to your portfolio, there are some issues you should take into account.
One of the main factors to consider before buying stock is your attitude toward risk. How much financial risk, if any, are you willing to accept? If the thought of even a small amount of risk makes you anxious, you probably would be considered risk averse, in which case stocks might not be an appropriate investment for you. If you can handle some risk, you still need to tailor the stock portion of your portfolio to your particular level of risk tolerance. Though past performance is no guarantee of future results, stocks as a whole have historically offered relatively high potential reward over the long term compared to most other types of investments. As a result, stocks generally have a higher level of risk compared to other investments. You can lose a portion of your investment in stocks--or even your entire investment. Among the factors that affect the level of risk you face with stocks are:
Different kinds of stocks carry different degrees and types of risk and are therefore suited to different types of investors. For example, if you are fairly conservative and prefer minimal risk, you might think about stable, relatively safe blue-chip stocks. If you are very aggressive, however, you may want to consider riskier investments like aggressive growth and microcap stocks. Although an investor can screen for potential risks before making an investment, it is virtually impossible to plan for every conceivable contingency that could affect a business. For this reason, stock investors must be prepared for some degree of risk.
How much of a profit do you hope to make on your stock investments? If you seek the potential for better returns than cash alternatives and most fixed-income securities such as bonds or notes can offer, and you don't want the management responsibility of real estate or partnerships, you should probably at least investigate investing in stocks. Their potential for higher returns than many other investments means that stocks as a whole have a better chance at staying ahead of inflation, thus preserving your money's purchasing power over the long term. If you are certain that you want to pursue the highest returns possible, the stocks that you should consider are very different from those suitable for an investor who would be happy with modest returns. Of course, you should always weigh your desired return against the amount of risk you are willing to assume, because the potential for higher returns also means greater potential for loss. It can be challenging to strike the right balance.
First and foremost, your finances will determine whether you are in a position to invest in stocks and, if so, what types of stocks are appropriate for you. If even a small loss would have a meaningful impact on your finances, stocks may not be a viable option for you. If you have relatively limited resources, the types of stocks you choose and the amounts you invest will probably differ from those of an investor with substantial assets. Also, make sure you consider your finances in relation to your income and other personal circumstances. For example, if you have $200,000 available to invest but also have a child who will be attending college within a couple of years, the choices you make about stocks probably won't be the same as those of someone who has the same amount of investable assets but no significant near-term financial obligations.
Stocks are typically a long-term investment. The reason is that stocks can be volatile. If you're counting on a stock's price going up, it may take several years of ups and downs to reach your desired selling point--if indeed it ever does. But there is another reason. The sale of stock held for one year or less results in short-term capital gain or loss, and short-term capital gains are taxed at ordinary income tax rates. By comparison, the sale of stock held more than one year results in long-term capital gains, and long-term capital gains generally are taxed at lower rates than ordinary income. For example, if you are in the 28 percent tax bracket for ordinary income, your long-term capital gains are generally taxed at 15 percent.
Your investment choices will naturally be affected by the various factors discussed previously: your attitude toward risk, your desired return, and your financial and personal circumstances. Other factors may come into play as well, but these are the most common ones. Based on these very important considerations, you and your financial professional will be able to choose investments that match your situation. Different stocks may have very different strengths and weaknesses in terms of how they attempt to achieve a return. For example, you may want short-term gains, long-term capital appreciation (growth in value), steady income, or some combination.
No one, not even the most esteemed expert, can forecast with any certainty what the stock market will do from day to day or from year to year. It's not for a lack of trying, however. It seems there are always a number of conflicting theories floating around that attempt to predict or explain the market. You may have your own theories as to how the market works or will perform in the future. If so, such beliefs will likely influence your decisions about which stocks to invest in or whether to invest in stocks at all. In addition, your research into specific companies may guide you toward certain stocks and steer you away from others.
As you probably know, hundreds of millions of shares of stock trade daily on the stock market. The stock market is a general term referring to the organized trading of stocks and other securities through various exchanges, including the over-the-counter market. Stocks are generally bought through intermediaries, known as securities brokers and dealers. Investors can also purchase a group of stocks indirectly by owning shares of a mutual fund or an exchange-traded fund (ETF).
Most stocks are traded on various stock exchanges. Two major U.S. exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX). The Nasdaq is an equally important U.S. exchange, although there is no trading floor—the stocks are bought and sold over a broker-dealer computer network. In most cases, when you buy or sell stock, you go through a broker rather than deal directly with the issuer of the stock. This is true for most transactions, including initial public offerings (IPOs) and secondary offerings. In exchange for brokerage services, you ordinarily have to pay your broker (including discount brokers) a commission based on the dollar value of a particular transaction or the number of shares purchased. Many brokerage firms also offer so-called wrap fee programs, which are all-inclusive accounts whose fee structure includes commissions and investment advisory services.
In addition to the major exchanges, you can buy and sell stocks on the over-the-counter (OTC) market. Stocks that trade on the OTC market are generally those of smaller companies that don't trade on the NYSE and the AMEX because they don't meet the listing requirements of those exchanges. In recent years, however, many companies that qualify for listing have chosen to remain with OTC trading because they prefer this system to the centralized approach of the major exchanges.
An IPO occurs when a corporation decides to go public by offering shares of its stock to the general public for the very first time. Only the first issue of stock made available to the public is considered an IPO; subsequent issues by a public corporation are called public secondary offerings.
There are several ways that investors can evaluate the financial health of a company, as well as its prospects for the future. These methods may include an examination of factors specific to the individual company, or they may pertain to the industry as a whole.
The stock market is enormous; there are many different types of stocks from which you can choose. This should come as no surprise, given the number of companies worldwide that sell stock to the public. The types of stocks that you ultimately pick should depend on your individual circumstances. In narrowing the field to appropriate stocks for your portfolio, your financial professional can be immensely helpful. Very broadly speaking, stocks can be divided into two general categories--common stock and preferred stock. In many cases, a single company will make both kinds of stock available to investors. Each has its own particular strengths and weaknesses. Stocks can be further broken down into voting stock and nonvoting stock. Beyond that, there are stocks for investors of all types. For the more conservative investor who wants to keep risk to a minimum, there are blue chip stocks and conservative, income-oriented stocks. For the very aggressive investor who sits at the other end of the spectrum and is more interested in the potential for greater returns, there are aggressive growth stocks, microcap stocks, and emerging market stocks, among others. If you fall somewhere in between these two extremes, you may find a fit with midcap stocks, value stocks, and growth stocks. If you closely follow current economic conditions, cyclical stocks may be an appropriate option, just as international stocks may be a good match for an investor who stays attuned to foreign markets and is willing to accept the added risks of foreign investing.
There are several strategies you can adopt to get the most out of your stock investments. These range from very basic strategies appropriate for a novice, to more complex strategies that a sophisticated investor might be inclined to use. Some of the most common strategies available to you include buy low/sell high, buy and hold, and dollar cost averaging.
Contact a VyStar Investment Services Financial Advisor today by phone (904) 908-2495 or email VISMarketing@vystarcu.org.
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