What is a stock?
Stocks, also called shares or equity, represent ownership in a publicly traded company. When you buy a stock, you become a partial owner (shareholder) and share in the company’s risks and rewards.
Why invest in stocks?
The main goal of investing in stocks is to grow your wealth. You can make money through capital gains (selling stock at a higher price than you paid) and dividends (company earnings distributed to shareholders).
Capital Gains and Losses
Stock prices fluctuate based on company performance, economic factors, and market perception. Selling a stock for more than you paid results in a capital gain, which is subject to taxes. Long-term gains (held more than a year) are taxed at lower rates than short-term gains. Selling for less creates a capital loss, which can offset gains and reduce taxable income.
Dividends
Dividends provide a portion of a company’s earnings to shareholders. Some companies reinvest earnings instead, aiming for long-term growth. Shareholders may also vote on corporate matters, such as board elections and mergers.
Investing in stocks offers growth potential but comes with risks. Understanding these basics is key to making informed investment decisions.
What Is a Stock Index?
A stock index is a list of stocks created to represent a segment of the market. It measures performance for a specific group, such as large-cap, mid-cap, or small-cap companies.
Purpose of a stock index
Indexes give a quick view of market trends and performance over time. They do not represent direct investments, but you can invest in funds designed to track an index.
Examples of large-company stock indexes
-
Dow Jones Industrial Average (DJIA): Tracks 30 large companies; traditional daily benchmark.
-
S&P 500: Includes 500 of the largest U.S. companies, covering ~75% of the equity market.
-
Russell 1000: Represents ~1,000 largest U.S. companies, covering ~92% of U.S. equities.
Each index measures the market differently. The Dow may move differently from the S&P 500 because it includes fewer stocks and doesn’t cover all industries. Understanding indexes helps investors gauge market trends and compare investment performance.
Michele Clark
Michele has more than 25 years experience in financial services and has developed a specialization in working with people who are starting to seriously think about their retirement or who are retired and facing all of the complex planning issues one faces during this time.
She works with clients to coordinate decisions around investments, retirement accounts, Social Security, funding health care, tax planning, cash-flow, maximizing employer benefits, charitable gifting strategies and estate planning.
Before joining Acropolis Investment Management, Michele was the founder and managing principal of Clark Hourly Financial Planning and Investment Management for nearly nine years with an additional sixteen years at banks and investment firms.
Michele has been quoted in such online and print media outlets as The Wall Street Journal, Money Magazine, USA Today, Market Watch, US News & World Report, CNBC.com, AARP, St. Louis Post Dispatch, Fox Business, Forbes, Los Angeles Times, Financial Planning Magazine, St. Louis Public Radio, Yahoo Finance, St. Louis Magazine, and others.
Michele earned her B.A. from Purdue University. She is a CERTIFIED FINANCIAL PLANNER® practitioner, obtained the Chartered Retirement Planning Counselor (CRPC®) designation from the College for Financial Planning, and is a NAPFA Registered Investment Advisor.
Michele has volunteered her time for financial literacy outreach at Financial Planning Days, Money Smart Week, Habitat for Humanity and others.
Michele has served on the Board of Directors of the Financial Planning Association of Greater St. Louis since January 2014 and is Past President and currently serving as Chair of the Board.