The third asset class is stocks. When you buy shares of stock, you purchase an ownership share of the company. In fact, many stocks can provide both growth and income. The price of the stock moves up or down depending on how much you and other investors are willing to pay for it at the time. Investors can purchase common stock or preferred stock.
Investors can also buy stocks to diversify their portfolio through stock funds.
Preferred Stocks represent equity on a corporation's balance sheet but are actually more similar to bonds. Preferred stocks normally offer a fixed, quarterly dividend established when issued by the corporation, whereas common stock may or may not pay a dividend. Preferred stocks normally pay higher dividends than common stock, providing yields that are comparable to bonds, and the stocks' prices will tend to fluctuate with interest rates. A company's board of directors decides whether to pay a dividend from earnings to shareholders. Profitable companies in mature industries may pay a dividend and increase it over time.