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With stocks, there's no FDIC to protect you against losses. No compound interest. You're on your own. Your stock can rise like a rocket or drop like a stone – or grow steadily.


You can sell your stocks at any time. BUT when you sell, you sell them for what they are worth at that moment. If that's more than you paid for them, you've earned money. If the price of your stock has fallen since you bought it, you'll be losing money if you sell it.

Return dividends

This is a payment made by a company to a stockholder to share in the company's profits. Dividends are paid according to how many shares you own – for example, a dollar a share. Dividends can be paid in cash, but they can also be "paid" in the form of additional stock that is automatically re-invested in the company. Dividends are usually paid quarterly.


If your stock appreciates, that means the price of your shares (units) rises in value. So each share of your stock is worth more than it was before. You "realize" (obtain) this gain only after you sell the stock. Companies and shareholders want stocks to appreciate, but only up to a point. Why? Read on.


If shares cost too much, they are less attractive to people shopping for good stock. As a shareholder, you want to encourage more people to buy shares of your stock. The company feels the same way. So when a stock has reached a high dollar value, the company may split the shares, lowering the per-stock price. Splitting encourages more investors to buy. Splitting actually means reducing a stock's price but increasing the number of shares each shareholder owns. Here's how it works.

You may have 100 shares. You paid $30 each for them several years ago. Now they're worth $60 each. The company splits the shares two-for-one, which means you now own twice as many shares (200) but each is now worth $30. The amount of your investment hasn't changed. True, your shares are only worth half their former price, but you now own twice as many shares. By splitting, the company has made shares affordable again.