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Stocks Education

Q: Why invest in stocks?

Stocks can offer investors: Historically higher rate of return over longer holding periods, through past performance is no guarantee of future results Suitable investment choices for long-term investors The opportunity to invest in companies that align with your values Tradability throughout the day The ability to invest using a growth strategy, value strategy or combination of the two

Q: What are the different types of stocks I can invest in?

Common Stock Preferred Stock Growth Stock Value Stock Blue-Chip Stock Income Stock Restricted Stock Income & Preferred Stock

Q: What is portfolios diversification, and why is it important?

Diversification means having a broad variety of investments so that your portfolio isn�t overly dependent on any single investment. By diversifying, you may find the balance between potential risks and rewards that may be in your best interest for your particular circumstances and goals.

Learn about investing in stocks

Understand the basics of stocks

What are
stocks? tab 1 of 3 Why invest in
stocks? tab 2 of 3 Things to
consider tab 3 of 3

What are stocks?

Stocks, also called equities, help drive growth in long-term portfolios. When you invest in stocks, you own shares in companies, represented by the number of shares possessed. The value of your investments reflects how well those businesses perform.

See what stocks can do for your portfolio and learn about possible risks.

Stocks Can Offer Investors

Historically higher rate of return over longer holding periods, through past performance is no guarantee of future results
Suitable investment choices for long-term investors
The opportunity to invest in companies that align with your values
Tradability throughout the day
The ability to invest using a growth strategy, value strategy or combination of the two

Know the Risks Associated with Stocks

While stocks often have higher growth potential, they are more vulnerable to volatility and carry more risks than other investments

Stocks can require more time to research, and familiarity with financial statements, annual reports and news about the company are key to success

Diversifying your portfolio could require more effort than if you were to invest in ETFs or mutual funds, which may offer built-in diversification

In the event of a company going defunct, preferred stockholders, bond holders and other creditors will get paid out before common stockholders

Investors Should Consider

Your confidence in the company you're investing in
Your response to market volatility and how it fits into your long-term investing strategy
Any capital gains taxes that will apply if you sell stock for profit
Key data points like earnings per share, market capitalization, dividend yield, and more

What are the different types of stocks I can invest in?

Common Stock

Common stock, simply referred to as stocks, as shares of ownership in a corporation. A stock in an instrument that signifies an ownership position, or equity, in a corporation, and it represents a claim on its proportionate share in the corporation's assets and profits.

Preferred Stock

Preferred stocks are capital stocks that provide a specific dividend that is paid before any dividends are paid to common stockholders, and that takes precedence over common stock in the event of a liquidation.

Growth Stock

Growth stock is company stock that is growing earnings and/or revenue faster than its industry or the overall market. Such companies usually pay little or no dividends, preferring to use the income instead to finance further expansion.

Value Stock

A value stock is a stock with a price that appears low relative to the company's financial performance, as measured by such fundamentals as the company's assets, revenue, dividends, earnings, and cash flows.

Restricted Stock

In a restricted stock plan, participants receive shares that are subject to certain restrictions from the company without cost or at a price determined by the company. They typically vest in increments over a period of several years. Dividends or dividend equivalent rights may be paid, and award holders may have voting rights during the restricted period.

Income & Preferred Stock

Income & preferred stocks are a fund that normally seeks a high level of current income through investing in income-producing stocks, bonds and money market instruments, or a fund that invests at least 65% of its assets in preferred securities, often considering tax code implications.

Common questions about stocks

If you're looking for more information, check out these responses to some of the common questions investors have about stocks

Expand all

What is the difference between a growth stock and a value stock?

You might think that a growth stock and a value stock mean the same thing based on their names, but there are important differences to keep in mind. A growth stock is company stock that is growing earnings and/or revenue faster than its industry or the overall market (hence the name "growth").

A value stock, on the other hand, is a stock with a price that appears low when taking into account the company's financial performance (measured by the company's assets, revenue, dividends, earnings, cash flow, etc.) These stocks can be thought of as being a "good deal."

What is the difference between a common stock and a preferred stock?

Common and preferred stock differ in four main areas: dividends, capital appreciation, voting rights and what happens in the event of bankruptcy.

Common stockholders have a variable dividend and higher potential for capital gains (they are also impacted greatly by market fluctuation). Preferred stocks, on the other hand, have a fixed dividend and lower potential for capital gains, and they are not as impacted by volatility. Common stockholders also have voting rights while preferred stockholders do not. Finally, in the event of a bankruptcy, preferred stockholders are paid their dividends before any dividends are paid to common stockholders.

What is the difference between market orders and limit orders?

Market orders typically are fully and promptly executed at the prevailing market price when the order is presented for execution. However, investors may not know their ultimate execution price when the order is entered.

Limit orders allow investors to make sure they don't pay more than they want for an asset or sell it for less than desired. Because of the price limits, investors run the risk that a purchase or sale will not be executed.

What is portfolios diversification, and why is it important?

Want to learn more about stocks?

Whether you're looking to understand the basics of stocks or you're ready to dive into the technicalities, Merrill has the educational resources for you.

Our tools can get you started

Use Merrill's powerful investing tools to get actionable insights and find the best investments for you. Our expertise will help you find ideas, narrow down your options and help you understand individual investments at a glance.

Learn more about Merrill investing tools

Learn about a full range of investment topics

Build foundational investing skills, learn to identify the right assets for your portfolio and discover tools to help you along the way.

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Investing involves risk including the possible loss of principal investment.

Footnote

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Diversification and asset allocation do not ensure a profit or protect against loss in declining markets.

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Investment products offered through Merrill Lynch, Pierce, Fenner & Smith Incorporated, and insurance and annuity products offered through Merrill Lynch Life Agency Inc.:

Are Not FDIC Insured	Are Not Bank Guaranteed	May Lose Value
Are Not Deposits	Are Not Insured by Any Federal Government Agency	Are Not a Condition to Any Banking Service or Activity

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory and other services. Additional information is available in our Client Relationship Summary (PDF).

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp.").

Merrill Lynch Life Agency Inc. ("MLLA") is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation.

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Investment products offered through Merrill Lynch, Pierce, Fenner & Smith Incorporated, and insurance and annuity products offered through Merrill Lynch Life Agency Inc.:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

Are Not Deposits

Are Not Insured by Any Federal Government Agency

Are Not a Condition to Any Banking Service or Activity

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

The performance data contained herein represents past performance which does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance information current to the most recent month end, please contact us.

Net Asset Value (NAV) returns are based on the prior-day closing NAV value at 4 p.m. ET. NAV returns assume the reinvestment of all dividend and capital gain distributions at NAV when paid.

Market price returns are based on the prior-day closing market price, which is the average of the midpoint bid-ask prices at 4 p.m. ET. Market price returns do not represent the returns an investor would receive if shares were traded at other times.

Returns include fees and applicable loads. Since Inception returns are provided for funds with less than 10 years of history and are as of the fund's inception date. 10 year returns are provided for funds with greater than 10 years of history.

Before investing consider carefully the investment objectives, risks, and charges and expenses of the fund, including management fees, other expenses and special risks. This and other information may be found in each fund's prospectus or summary prospectus, if available. Always read the prospectus or summary prospectus carefully before you invest or send money. Prospectuses can be obtained by contacting us.

Expense Ratio – Gross Expense Ratio is the total annual operating expense (before waivers or reimbursements) from the fund's most recent prospectus. You should also review the fund's detailed annual fund operating expenses which are provided in the fund's prospectus.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation ("BofA Corp.").

Merrill Lynch Life Agency Inc. ("MLLA") is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

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Stocks Education

Learn about investing in stocks

Understand the basics of stocks

What are stocks?

See what stocks can do for your portfolio and learn about possible risks.

Stocks Can Offer Investors

Know the Risks Associated with Stocks

Investors Should Consider

What are the different types of stocks I can invest in?

Common Stock

Preferred Stock

Growth Stock

Value Stock

Restricted Stock

Income & Preferred Stock

Common questions about stocks

What is the difference between a growth stock and a value stock?

What is the difference between a common stock and a preferred stock?

What is the difference between market orders and limit orders?

What is portfolios diversification, and why is it important?

Want to learn more about stocks?

Build your investing skillset with online courses

Why market capitalization matters

Asset allocation: A sound investment strategy

Our tools can get you started

Learn about a full range of investment topics

Ready to get started?

Call us

Set up a meeting

I'd Like to

Discover Merrill

Contact Us

Unlimited $0 Trades