If you are a beginning investor and can not decide if you should invest in a stock or a mutual fund, read on to find some helpful information that will help you decide. Remember, the best kind of investor is an informed investor, so let s get started on understanding the basics of stocks and a mutual funds. Stocks A stock is partial ownership or equity in a company. When you buy stock in a company, you become a shareholder. If you are a shareholder of preferred stocks, usually you do not have voting rights, but you receive a fixed dividend and are paid before common stockholders.
Dividends are distributions of a company s profit or earnings back to the company s shareholders.
Many company s offer dividend reinvestment plans , which means that instead of sending you a check for the dividends earned, the dividend is used to purchase additional sha res of the company s stock. You can purchase stocks through a broker, through dividend reinvestment plans or directly through the company, which is known as direct st ock purchase . DRIPs and direct stock purchases allow the individual investor to purchase shares directly from the company. As always, remember to research the company before bec oming a shareholder. A mutual fund is a professionally managed pool of investment money from investors with similar investment objectives.