What is a Stock | Stock Definition
Stock (or capital stock) of a business entity represents the original capital paid into or invested in the business by its founders. Investors can participate in the stock market by purchasing individual stocks, mutual funds, or through an Exchange Traded Fund (“ETF”). The stock market and stock market investments are subject to fluctuations and risk. Investment professionals should assist their clients in balancing a stock portfolio with investments in investment grade fixed income and cash depending on an investor’s investment objectives and risk tolerance. Financial professionals understand that asset allocation is an important tool to reduce risk and maximize returns. It is a well-known standard in the securities industry that older investors cannot sustain the same volatility in their portfolios as younger investors who have the ability to replace their losses. A rule of thumb is that investors should consider a stock allocation percentage equal to 100 minus their age. For example, if an investor is 75 years old, an allocation of 25% or less in stocks, and 75% in investment grade fixed income and cash is likely appropriate.
Stock Risk | Stock Market Risk
Unfortunately for investors, investment professionals earn significantly greater fees and commissions for stock related investments than for fixed income recommendations. As a result, investment professionals may often compromise investor’s needs for their own benefit. It is also quite alarming to learn how many investment professionals that recommend significant allocations to stock related investments to retirees and those investors approaching retirement. These investors likely cannot replace their savings, and significant losses at this stage of life will significantly impact an investor’s ability to afford future medical and health care costs.
Legal Help for Victims of Stock Fraud
If your investment professional has recommended an allocation to stocks that exceeds your stated investment goals and risk tolerance, you may have a claim for damages. The Stock Fraud Law Firm of Gilman Law LLP is a leading securities fraud law firm and is here to help you recover damages. For a FREE evaluation of your case, please complete our Free Consultation Form Online, or if you need to speak to a financial fraud attorney right away CALL TOLL FREE (888) 252-0048 today.