Part 2: Stocks

Welcome back to The Apricot Investor’s Glossary series, where we’ll take complex terminology and turn it into bite-sized pieces of knowledge, perfect for seasoned investors and newbies alike. The series starts with fundamental vocabulary and will delve into more complex terminology over time.

In Part 1: Investment, Risk, Diversification, we compared investments to planting an apricot tree. Now, let’s explore one of the “seeds” – investment instrument types – you can plant in your financial garden.

Stocks

Imagine someone has a big garden and you buy one or several of the trees (stocks) in that garden. Since you only own a small part of the garden, you do not participate in its management. You can sell these trees anytime you want. If the garden flourishes, you can get a basket of delicious fruits (for example dividends) or you can sell your trees for more than you paid initially. If the garden was not taken good care of or faced bad weather, you’ll get less fruit or not at all. The price of the trees will also go down and in case you want to sell them, they might value less than what you had paid for them.

– Think of it as owning a tiny piece of a company, like Apple or Google*. When the company performs well, its stock price goes up, potentially bringing you capital gains. If the company struggles, the price might fall, leading to losses.

– Risk: Generally higher than bonds and ETFs, but also higher potential for growth.

This is one the most common types of investment “seeds” (instruments) available. It’s important to remember that investments are subject to market fluctuations and carry inherent risks. Before investing, consider your financial goals and your ability to take financial risks.

See you in Part 3 where we’ll explore more types of investment instruments. And remember, investing in knowledge is one of the most valuable decisions you can make.

*The examples in this text are for illustrative purposes only. This does not constitute investment advice or a recommendation to buy or sell any specific investment instrument.