basics
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Stocks - Stocks are securities
that represent ownership in a corporation.
Corporations issue shares of stock in order to
raise capital. In return for their investment,
common shareholders become part-owners in the
corporation and thus obtain all of the rights of
ownership including the right to vote their
shares to elect a board of directors. Over the
past 80 years, stocks (equities) have
outperformed other investments including bonds.
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Stocks, Bonds, Bills, Inflation
1925-20061
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Compounded
Annual Return
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Small Company Stocks |
12.7% |
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Large Company Stocks |
10.4% |
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Long-Term Government Bonds |
5.4% |
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Treasury Bills |
3.7% |
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Inflation |
3.0% |
1Source: Ibottson Associates
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Bonds - A bond represents the
indebtedness (liability) of their issuer (a
corporation or government) in return for a
specified sum, the principal. The owners of
bonds receive interest payments in return for
use of their money. When the bond is issued,
the rate of interest to be paid is determined
and is usually fixed over the lifetime of the
bond. Virtually all debt has a maturity date,
which is the particular date by which the bond
must be paid off. Bonds are usually the
investment choice for those seeking current
income and relative safety. |
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Mutual Funds - In a mutual
fund, investors pool their money to achieve a
common objective, with a professional money
manager buying and selling securities for the
fund. Mutual funds allow you to own hundreds of
different stocks, bonds, and money market
instruments under one umbrella investment. Over
the past two decades, mutual funds have emerged
as one of the most popular investments. The
benefits of mutual funds include reduced risk
through diversification, professional
management, increased liquidity, and, in many
cases, a degree of flexibility that will allow
you to switch investments within a fund family.
Of course, mutual fund
shares do fluctuate with market conditions and
carry various degrees of risk depending on the
individual fund's objectives. You should always
read the individual fund's prospectus for
complete information regarding charges,
expenses, and possible risk factors.
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retirement
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The good news is that thanks to advances in medicine
and the healthier lifestyles of many Americans, the
average life expectancy in the U.S. has increased
dramatically. |
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What this means, though, is that you may have to
prepare for a retirement lasting 20 years or more.
Therefore, a comfortable retirement will take
careful planning and saving. Whether you are an
individual planning for your own future, a business
owner looking to establish a company retirement
plan, or a teacher or other school employee deciding
between various TSA/403(b) plans, Hewitt Investment
Advisory can help you establish the right plan for
your situation.
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retirement for individuals,
businesses, and teachers
(coming soon)
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insurance & estate
planning
(coming
soon)
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investment
strategies
(coming soon)
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