As a stockholder, you may participate in the company s growth potential. Stocks are issued by large, medium and small companies. Stocks of large companies usually are the most stable. Small cap stocks, by contrast, offer the greatest potential for high returns, but carry the most risk. Stocks from medium-sized companies fall somewhere in between.
Stocks are popular because of their long-term performance.
While past performance is no guarantee of future results, stocks have returned 11 percent annually over the last 73 years, outpacing bonds and U.S. Treasury bills. Bonds Bonds are loans. When an investor buys bonds, he or she is lending money to a government or private company. When governments issue bonds, the money often is used to build roads, schools or other public projects. Private companies may sell bonds to raise cash for an expansion.