First thing is you need to decide whether you’re the type of person that would like to choose the stocks and bonds yourself or would you like to find someone to manage the process for you? If you want to find a professional advisor to help you, you’ll want to consider a few factors –

• What will the advisor charge you for commissions?
• Some advisors require a minimum initial investment.
• How often will the advisor be available for your questions and phone calls?

You will want to find a advisor that is always looking out for your best interest, will be upfront and honest about any risks and will answer any questions you may have.

By definition, a stock is a share in the ownership of a company. As you acquire more stock, your ownership in the company becomes greater. You can buy or sell shares of stock with the help of a licensed brokerage firm who actually makes the purchase or trade. In the early days of stock exchanges, pricing information was transmitted with tickertape which was a long piece of paper that printed basic data through a telegraph wire. That’s why today we still refer to stock quotes as the ticker.

A bond is a fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. There are three main categories of bonds:

1. Corporate bonds which are issued by companies.
2. Municipal bonds which are issued by states or municipalities.
3. US Treasury bonds, which are sometimes referred to as Treasuries.

A mutual fund is an investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s investments and attempt to produce income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus. The average mutual fund holds hundreds of different securities, which means mutual fund shareholders gain important diversification at a very low price.

Your risk tolerance relates to the amount of market risk or market ups and downs, you are willing to tolerate. Your risk tolerance also has a component called risk capacity.   This signifies how much risk you can financially afford to take – which can be much different than how much risk you’re willing to take.

Our Wealth Management team can help you find your risk tolerance through a questionnaire.   The questionnaire will give you some investment scenarios and your answers will help determine if you’re an aggressive investor, moderate investor or conservative investor.  

Ups and downs of the market are completely normal. There is no one theory to explain the volatility. A few factors that influence the fluctuations in stock prices are –

• Supply and demand – if more people want to buy a stock than sell it, then the price moves up accordingly.
• How much profit a company is making or not making. Market analysts base the future value of the company on their earnings projection. This projection then either helps to increase or decrease the company’s stock value.
• Economic activity like a pending war or a political election.

The Dow Jones Industrial Average, often referred to as simply the Dow, is one of several well-known stock market indices. The DJIA was created by Charles Dow, founder of the Wall Street Journal, to measure the daily stock price movements of 30 large, publicly-owned U.S. companies. The 30 blue-chip companies, considered to be the leaders of the economy, are chosen by the editors of the Wall Street Journal, a practice that dates back to its inception in 1896.

There is no hard and fast answer. It depends on whether or not watching the market go up and down stresses you out. For the average person, we suggest you review your portfolio twice a year. We also advise meeting with your investment advisor once a year to evaluate whether any rebalancing of your asset allocation is needed.