In our previous Simple Series, “Not Boring—Brilliant: Why Bonds Belong in Every Portfolio,” we covered the quiet strength of bonds — investments known for their stability, income, and role as a buffer against market volatility. Now, we’re shifting gears to explore a very different kind of investment: stocks.
Stocks tend to get a lot more attention — and it’s easy to see why. They represent ownership in companies, have the potential to grow significantly in value, and play a major role in driving long-term wealth. But they can also be unpredictable. Unlike bonds, stocks can swing sharply in price, sometimes reacting to headlines, market shifts, or even investor sentiment.
Understanding how stocks work — and how they fit into your broader investment strategy — is key to building a portfolio that balances growth, risk, and resilience over time.
What is a Stock?
A stock represents ownership in a company. When you buy a share, you’re purchasing a small piece of that business. If the company performs well, your investment may grow in value — either through price appreciation or dividends (profits shared with shareholders).
Risk and Reward
Stocks come with more ups and downs than bonds — they’re naturally more volatile. But with that comes the potential for greater long-term growth. The key principle?
The higher the potential reward, the higher the risk.
That’s why stocks are typically suited for long-term investors who can ride out short-term market swings.
Why Do People Invest in Stocks?
• Growth: Over time, stocks have outperformed most other asset classes.
• Diversification: Stocks play a key role in a balanced portfolio.
• Ownership: You’re supporting companies and industries you believe in.
A Long-Term Game
It’s normal for stocks to fluctuate — sometimes sharply. The biggest mistake? Reacting emotionally and selling during downturns. Staying invested and maintaining a diversified mix is usually the smarter play.
When it comes to investing in stocks, success is less about predicting short-term market movements and more about staying consistently invested over time. History shows that time in the market — not timing the market — is what truly builds long term wealth. A diversified portfolio helps smooth out the ups and downs, giving your investments room to grow through all kinds of market cycles without having to guess what comes next.
Next Up: In the next installment of the Simple Series, we’ll show you how to put the pieces together — combining stocks, bonds, and other investments to build a well-balanced portfolio.
Have questions or want to see how this applies to your plan? Let’s connect.
The Simple Series from Financial Designs Wealth is your go-to resource for demystifying the financial topics that matter most. At FD Wealth, we believe financial planning doesn’t have to be complicated, the Simple Series is here to prove it. Let’s simplify finance, together.