Stocks & Bonds


Stocks (Corporate Equities) | Bonds (Fixed Income Securities) | Tax Exempt Municipal Bonds





Many companies raise capital through the sale of corporate stock to the public. When the stock is first sold to the public, it is known as an Initial Public Offering, or IPO. More frequently, “common stock” is bought and sold each day on “secondary markets” around the world, including the New York Stock Exchange, the NASDAQ, various Electronic Communication Networks (ECNs) or one of the many regional or foreign exchanges.

Profitable companies often distribute a portion of their earnings to their shareholders in the form of dividends. The potential receipt of dividends is a common motivation for purchasing/owning a particular stock. Perhaps more importantly, purchasing stock permits investors to efficient- ly become an owner (to the extent of the shares they purchase) of companies they believe will be successful. Stock ownership can therefore be both exciting and liberating, but it should be pursued with caution, discipline and professional guidance1.


Bonds provide a guarantee, backed by the issuing entity (usually a government agency, municipality, or corporation), to return your original investment principal plus a fixed interest rate if the bond or bill is held to maturity. There is usually a correlation between the creditworthiness of an issuing entity and the interest rate that is paid to the bondholder. Bonds can also be traded through secondary markets allowing the investment to be sold at the market rate rather than held to maturity, thereby providing liquidity2. Fixed income securities provide:

• a guarantee of the principal and interest rate, backed by the issuing entity, if held to maturity;

• the flexibility of various maturities to fit your investment needs.


Most municipalities raise money through the sale of bonds (i.e. they borrow from investors), which are debt securities issued by a state, municipality, or county, in order to finance its capital expenditures. Because there is a civic purpose for the money raised through these bond issues, they often receive special tax treatment from federal and state authorities. Municipal bonds are exempt from federal taxes and from most state and local taxes, especially if you live in the state where the bond is issued. Tax- Exempt Municipal Bonds offer:

• an exemption from federal and possibly state/local income taxes, allowing for a potentially higher rate of return;

• guaranteed returns, backed by the borrowing institution or municipality, if held to maturity;

• the opportunity to sell currently held bonds, before maturity, at the market rate in secondary markets3.

1Selling price may be more or less than the price paid for the security.

2Selling price may be more or less than the price paid for the security.

3 Selling price may be more or less than the price paid for the security.