Investing in Stocks WHAT ARE THE DIFFERENT CLASSIFICATIONS OF STOCKS? WHY INVEST IN STOCKS? CAN YOU LOSE MONEY?

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1 Ivestig i Stocks

2 Ivestig i Stocks Busiesses sell shares of stock to ivestors as a way to raise moey to fiace expasio, pay off debt ad provide operatig capital. Ecoomic coditios: Employmet, iflatio, ivetory ad cosumer spedig ifluece the potetial profit of a compay ad its stock price. Each share of stock represets a proportioal share of owership i the compay. As a stockholder, you share i a portio of ay profits ad growth of the compay. Divideds from earigs are paid to shareholders, ad growth is realized by the icrease i value of the stock. Stock owership also geerally gives you the right to vote o maagemet issues. Compay executives work for the shareholders, who are represeted by a elected board of directors. The goal of maagemet is to icrease the value of the corporatio s equity. If shareholders are dissatisfied with the corporatio s performace, they ca vote for a chage i maagemet. Govermet actios: Decisios o iterest rates, taxes, trade policy, atitrust litigatio ad the budget impact stock prices. Global ecoomy: Chages i foreig exchage rates, tariffs or diplomatic relatios ca cause stocks to go up or dow. All ivestig ivolves risks, ad there ca be o assurace that ay ivestig strategy will be successful. However, uderstadig these factors ca help you make soud ivestmet decisios ad keep losses to a miimum. WHY INVEST IN STOCKS? The mai reaso that ivestors buy stock is to seek capital appreciatio ad growth. Although past performace is o guaratee of future results, stocks have historically provided a higher average aual rate of retur over log periods of time tha other ivestmets, icludig bods ad cash alteratives. Correspodigly, though, stocks are geerally cosidered to have more volatility tha bods or cash alteratives. CAN YOU LOSE MONEY? WHAT ARE THE DIFFERENT CLASSIFICATIONS OF STOCKS? Stocks are ofte classified i the followig ways: Growth stocks have earigs that are icreasig at a faster rate tha the market average. These are usually i ew or fast-growig idustries ad have the potetial to give shareholders returs greater tha those offered by the stocks of compaies i older, more established idustries. Growth stocks are the most volatile class of stock, however, ad may be just as likely to go dow i price. Part of soud portfolio maagemet is diversifyig ivestmets so that if oe type of ivestmet is performig poorly, aother may be doig well. Actios of ivestors: If a large umber of ivestors believe that the atio is eterig a recessio, their actios ca affect the directio of the stock market. Value stocks are those of compaies with good earigs ad growth potetial that are curretly sellig at a low price relative to their itrisic value. Due to some problem that may be oly temporary i ature, ivestors are igorig these stocks. Sice it ca take quite some time for their true value to be reflected by their price, value stocks are usually purchased for the log term. Busiess coditios: A ew patet, a icrease i profits, a pedig merger or litigatio could affect ivestor iterest ad stock prices. Icome stocks are geerally ot expected to appreciate greatly i share price, but typically pay steady divideds. Utilities are a example of compaies that have historically bee cosidered icome-orieted. 2 ATLANTICTRUST.COM

3 Ivestig i Stocks Blue chip stocks are the stocks of large, well-kow compaies with good reputatios ad strog records of profit growth. They also geerally pay divideds. Pey stocks are very risky speculative stocks issued by compaies with short or erratic performace histories. These stocks are so amed because they sell for uder $5 per share. Their low price appeals to ivestors willig to assume a total loss i exchage for the potetial for explosive growth. It is usually best to diversify amog the differet classificatios ad ot ow stock i just oe or two compaies or idustries (though diversificatio aloe caot guaratee a profit or esure agaist a loss). HOW DO YOU SET UP A BROKERAGE ACCOUNT? You will eed to complete a ew accout agreemet ad make three importat decisios: Who will make the ivestmet decisios? You will uless you give discretioary power to your broker or aget. Discretioary power allows a broker or aget to make decisios based o what he or she believes is best for you. Uless you limit the broker s or aget s discretio, this may be doe without cosultig you about the type of security ad umber of shares ivolved, or about the time ad price at which to buy or sell. Do ot give discretioary power to your broker or aget without seriously cosiderig if it is right for you. HOW ARE STOCKS BOUGHT AND SOLD? Durig a iitial public offerig (IPO), ew issues of stock are sold o the basis of a prospectus (a documet that gives details about a compay s operatio) that is distributed to iterested parties. Ivestmet bakers or brokerage houses buy large quatities of the stock from the compay ad sell them to ivestors. After the IPO, the stock may trade o a stock exchage or over the couter. Normally, stock is purchased through a brokerage accout. The buy order you place will be directed to the appropriate stock exchage. Whe someoe who ows the stock is willig to sell at the price you are willig to pay, the sale takes place. A commissio or fee is charged o your trasactio. Stock certificates may be trasferred from oe ower to aother sice they are egotiable istrumets. The certificates are issued i the buyer s ame or, more typically, held by the brokerage house i street ame (i.e., the brokerage firm s ame) o behalf of the ivestor. The advatage of a streetame registratio is that if you decide to sell, you do ot have to sig ad deliver the stock certificates before the sale ca be completed ad you do t have to worry about losig the stock certificates. How will you pay for the stock? A cash accout requires you to pay for each stock purchase i full at the time you buy it. A margi accout allows you to borrow moey from the brokerage firm. Securities that you ow are held as collateral, ad iterest is charged o the loa. If the accout value falls below the specified amout required to maitai the loa (eve as the result of a oe-day market declie), you must pay dow the loa balace to a amout determied i relatio to your ew accout balace. This is kow as a margi call ad ca potetially require the paymet of a sizable amout of moey. What level of risk ca you hadle? You will be asked to specify your ivestmet goals i terms of risk. Choices such as icome, growth or aggressive growth may be give. Make sure you uderstad the meaig of each term, ad be certai that the level of risk you choose truly reflects your ability to hadle risk. Ay ivestmet your broker or aget recommeds should be based o the category of risk you selected. READ THE ACCOUNT AGREEMENT Never sig a documet without readig ad fully uderstadig it. Early precautios ca prevet later misuderstadigs. ATLANTICTRUST.COM 3

4 Ivestig i Stocks Keep good records of: Documets you sig Documets outliig the details of a accout or ivestmet Periodic accout statemets Trasactio cofirmatios Documets verifyig a accout error was corrected Correspodece with your broker or aget Review these as soo as you receive them. Discuss with your broker or aget at oce ay discrepacies you fid ad follow up o ay actios take util you are satisfied. Never allow your broker or aget to mail statemets ad trasactio cofirmatios to someoe other tha you. It s importat that you check the accuracy of your ow accouts. BE PATIENT Some stock ivestors have made moey quickly, but they are the exceptio rather tha the rule. Ivestig i stocks requires a log-term outlook. Read books, atted semiars ad take advatage of professioal advice. Educatio, good judgmet, commo sese ad above all, patiece icrease your chaces of achievig your goals. NOTE: Divideds are paid whe declared ad there is o guaratee they will be declared i the future. 4 ATLANTICTRUST.COM

5 Copyright 2015, Forefield, Ic. All rights reserved. Atlatic Trust Private Wealth Maagemet, a CIBC compay, icludes Atlatic Trust Compay, N.A. (a limited-purpose atioal trust compay), Atlatic Trust Compay of Delaware (a Delaware limited-purpose trust compay), ad AT Ivestmet Advisers, Ic. (a registered ivestmet adviser), all of which are wholly-owed subsidiaries of Atlatic Trust Group, LLC. This documet is iteded for iformatioal purposes oly, ad the material preseted should ot be costrued as a offer or recommedatio to buy or sell ay security. Cocepts expressed are curret as of the date of this documet oly ad may chage without otice. Such cocepts are the opiios of our ivestmet professioals, may of whom are Chartered Fiacial Aalyst (CFA ) charterholders or CFP professioals. Chartered Fiacial Aalyst ad CFA are trademarks owed by CFA Istitute. The Chartered Fiacial Aalyst (CFA ) desigatio is a globally recogized stadard for measurig the competece ad itegrity of ivestmet professioals. Certified Fiacial Plaer Board of Stadards Ic. ows the certificatio marks CFP ad CERTIFIED FINANCIAL PLANNER i the U.S., which it awards to idividuals who successfully complete CFP Board s iitial ad ogoig certificatio requiremets. There is o guaratee that these views will come to pass. Past performace does ot guaratee future comparable results. The tax iformatio cotaied herei is geeral ad for iformatioal purposes oly. Atlatic Trust does ot provide legal or tax advice, ad the iformatio cotaied herei should oly be used i cosultatio with your legal, accoutig ad tax advisers. To the extet that iformatio cotaied herei is derived from third-party sources, although we believe the sources to be reliable, we caot guaratee their accuracy. Approved For Public Use. Ivestmet Products Offered are Not FDIC-Isured, May Lose Value ad are Not Bak Guarateed. ATLANTICTRUST.COM