Common stock in a publicly-traded company is a highly marketable, liquid investment. The disclosure of public information by companies is plentiful and accessible to investors who by consensus agree upon a market share price. If the valuation of common stocks was such a simple matter, a stock price could be calculated by any college graduate except for one factor, market sentiments. Market sentiment help explain why a stock’s market price can deviate from the true value of the company’s stock price, one reason why many consider a stock’s price to be speculative by nature. Common stock’s primary source of investment return is capital appreciation. Dividends can provide a significant increase in shareholder return when reinvested. Dividends paid on stock held for more than 60 days receive favorable tax treatment at tax rates below interest income for most investors.

Common stocks comprise the growth portion of the investment portfolio. Common stock investments are factored into the investment strategy by the allocation of the funds in proportions specified an investor’s investment objective, risk tolerance and investment time horizon. As a practical matter, client investments need to be classified according whether invested in cash, fixed income and equities for each account. The investment selection process requires further classification of the investments in common stock according to certain investment characteristics including:

• Selection Style;
• Market Capitalization;
• Industry/Sector;
• Foreign Non-US;
• Emerging Market;
• Single Country; and
• Market Correlation.

There are unique factors and considerations for a client account that can affect the asset allocation. Some of these factors include:

• Trust;
• Custodial;
• Restricted List;
• Tax Sensitive;
• Qualified Plan; and
• Securities Concentration.

It is important to determine what percentage of your investment portfolio should be invested in common stocks, and which type of common stocks based on your investment objectives, risk tolerances and investment time horizon.
Investors are advised to seek competent financial, tax and legal advice concerning the decisions they make with their investments. KlaymanToskes can provide you with a free consultation concerning any securities industry violations related to the handling of your investments accounts by a full-service brokerage firm or registered investment advisor.

Information contained on this webpage is for educational purposes only
and should not be considered legal advice.
No Information contained on this website creates an attorney-client relationship.