That is, you not only make money from the money you originally invested, but also from the gains made by that investment. Immediately , one of our Basic Investment Principles . When this is the case, a single event can hurt the entire portfolio. Diversification can take place within a single industry or market, or among several industries or markets. For more information on this topic, please see Diversify Your Investments , one of our Basic Investment Principles .
Dividends represent a portion of the company s profits.
Dividends are paid to reward the stockholders for the use of their money. For more information on this topic, please visit the Dollar-Cost Averaging section of Analyzing Your Personal Risk Tolerance , one of our Basic Investment Principles . This general term covers several types of common and preferred stocks as well as stock equivalents. These obligations generally protect the safety of the principal and provide a specified rate of return. For more information on this topic, please see the Growth Funds section of our Choosing a Fund Page .