Stocks allow you to share in the success of a public company as they represent shares of ownership, Revelli explains. While they are a popular investment, investors do need to know that they come with risk, as the performance of the shares is tied to the performance of the company.
Although there is risk involved, stocks may be a particularly good investment in 2022.
“Stocks historically allow you to stay ahead of inflation and receive income from dividends paid to shareholders,” Revelli said.
There are also ways to mitigate your losses.
“There is risk in losing your investment if the company does poorly, but you could claim a capital loss if you liquidate,” Revelli said.
It’s important to understand how stocks work, what you may owe on trades and which stocks are the best fit for your risk level.
“If the company does well, there could be short- or long-term capital gains tax on the appreciation if you sell,” Revelli said. “There are a multitude of choices, and it takes time to research to understand what stocks fit your risk tolerance and how to build a diversified portfolio.”