Radio Transcript, 2 minutes 30 seconds, for use during week
of September 24.
Description: Penny and Ira discuss different types of stocks--income,
growth, value, cyclical, etc.
Announcer: Invest Wisely comes to you from Iowa State University
Extension through a grant from the Investor Protection Trust,
providing investor education on the web at: investorprotection.org.
Ira: Penny, I’ve taken a look at my investments and I
understand that I need a mix of stocks, bonds, cash, and maybe
other asset categories .
Penny: That’s right, Ira. And your asset allocation might
be different from mine because our goals are different.
Ira: You’ve also said there are differences within a category
as well. Just what did you mean?
Penny: Yes. For example, while stocks in general are riskier
than investing in bonds, you’ll also find some stocks that
are less risky than average and some that are more risky.
Ira: So . . . How do I decide which stocks are right for me?
Penny: Let’s look at some different types of stocks. There
are income stocks, which are those stocks that regularly pay
a high percentage of earnings as dividends. These are stocks
that you can hold and be less concerned about market ups and
Ira: So, income stocks tend to have less risk?
Penny: Yes. They tend to be of low or moderate risk, whereas
growth stocks are those that have shown relatively fast growth
in earnings, causing their prices to rise.
Ira: So, growth stocks would be riskier?
Penny: Yes. Typically growth companies are in new or fast-growing
industries and will show more volatility. Investors generally
hope to make large capital gains with these stocks over the long
Ira: Okay, income stocks, which pay dividends and growth stocks
which are riskier and generally don’t pay dividends. Are
there other types?
Penny: Several. Value stocks have relatively low prices
compared to their historical earnings and the value of the company’s
assets. Cyclical stocks tend to rise and fall with the
economy. And speculative stocks are those of start-up companies
or companies that have lost much of their value and may or may
Ira: So, speculative stocks would have a lot of risk?
Penny: Yes. And cyclical stocks would change as the economy
in that particular sector changes.
Ira: Penny, you’ve given me a lot to think about. Since
I’m retired and have a small pension it seems to me I should
concentrate on income stocks . . . to supplement my income.
Penny: That makes a lot of sense to me, Ira. And remember,
for more information, visit the ISU Extension website at extension.iastate.edu
and look for ‘Invest Wisely.’