money guidance and how to get rich_139

_{Sure can. Here are some key groups.}

_{• "Cyclical" companies react strongly to economic change. Think of}

_{it this way: People spend money more conservatively during recessions,}

_{putting off major purchases such as cars and refrigerators.}

_{Thus, manufacturers of automobiles and large appliances are considered}

_{to be cyclical. Meanwhile, companies that aren't so affected}

_{by the economy are "defensive." An example would be pharmaceutical}

_{firms. If you're taking heart medication, you're not going}

_{to stop because of an economic downturn.}

_{• "Seasonal" companies experience significantly different levels of}

_{business at various times of the year. Department stores, for example,}

_{see sales surge during the Christmas holiday season. Swimming}

_{pool companies see large sales and profits mainly in the summer.}

_{• "Blue chip" companies have been around a long time and are perceived}

_{as being of higher-than-average quality and lower-than-average}

_{risk. They're usually steady growers and often pay dividends.}

_{(The term "blue chip" is derived from poker chips, where the blue}

_{chips are the most valuable.) "Red chip" companies are smaller,}

_{younger, less proven, and usually riskier. Some examples of blue}

_{chip companies: General Electric, ExxonMobil, Johnson & Johnson,}

_{Procter & Gamble, Coca-Cola, and Boeing.}

_{• "Growth" companies are growing faster than the market average.}

_{They usually pay little or no dividend, as they need any extra cash}

_{down — quickly. Aggressive investors favor growth stocks.}

_{Some examples of growth stocks: Microsoft, America Online, Cisco,}

_{and eBay. (Railroad and telegraph businesses were growth companies}

_{once — but things change over time.)}

_{• "Value" stocks are favored by investors looking to buy the proverbial}

_{"dollar for fifty cents." These are often companies that are temporarily}

_{out of favor or whose underlying value and prospects have}

_{not been recognized by investors.}

_{• "Income" stocks may not grow too quickly, but they pay fat dividends.}

_{They're sort of like bonds, which pay interest. Traditionally, utility}

_{companies have paid high dividends. Today, some real estate companies}

_{do, as well. People in or near retirement, who rely on the dividends}

_{to supplement pensions or savings, often favor income stocks.}

_{When evaluating companies, it helps to think of what categories they}

_{fall into. Learn these terms and concepts (and drop them in conversation),}

_{and you'll be the savviest Fool on your block.}