Frequently Asked Questions
When a company decides to raise capital to grow its operations (and its opportunity for increased profits), one option they may exercise is to "Go Public" - to issue and sell stock to the market through an Initial Public Offering (IPO). Any buyer of common stock effectively owns a piece of that business. The ownership of common stock in a company represents ownership interest and voting rights in guiding the objectives of the organization indirectly through its board of directors. The value of the stock is based on market selling prices on any given day. Another important component of owning common stock is the entitlement to dividends should the company be in a position to issue these returns on the investment. In essence, the profits of a company are often distributed back to the shareholder should these earnings be more than the forecasted needs or obligations of the company. This distribution is better known as earnings per share (EPS). In calculating the value of a stock, the market will always consider any anticipated EPS that may come due. Unlike a share of stock, a bond is an instrument that represents a debt obligation by the issuing entity to the bearer of the bond. Bonds are much like making loans to a corporation or government so they can fund projects. At maturity of the bond (a variable length of time, depending on the bond) the face value is redeemed and the bond will no longer pay semi-annual interest. They are rated on the respective entity's ability to make payments and satisfy its face value payment on the maturity date. The lower the rating, the more risk involved with the issue thus requiring higher coupon (interest) rates. Government bonds include those issued by the Federal Government and on the municipal level. Municipal bonds are unique in that they offer investors the potential for tax exempt income. A mutual fund is a large portfolio of stocks managed by a fund company. By including stocks from numerous companies, a fund can effectively reduce market risk through diversification. Some funds are riskier than others, however, depending on the types of companies it chooses for its portfolio. In addition to the broad resources of these funds, the investor enjoys the liquidity of a mutual fund. Should an investor choose to withdraw funds, they are usually available in a short amount of time. Account values will vary with market fluctuation. Absolutely. In fact, HSBC may be more comprehensive in its product and service offerings than other better recognized names in the investment industry. For instance, HSBC offers services ranging from discount brokerage at HSBC Securities to personal portfolio management through HSBC Bank's Trust and Investment Management Group. Having a global presence, we also have access to all primary international markets. Contact us or call your nearest HSBC Securities Financial Advisor. We will be glad to help!
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