Investing in stocks involves owning a portion of the equity in a company, which effectively allows the shareholder to receive a portion of the profits and assets of the company. company in the form of dividends. Stocks are generally classified as common stock or preferred stock, with common stock allowing investors to vote on key issues but not guaranteeing dividends (Markowitz 78). On the other hand, preferred shares do not confer voting rights but guarantee shareholders the payment of dividends. Investing in stocks offers investors relatively high returns compared to Treasury securities, but investments also carry high inherent risk. Stocks are purchased through licensed brokers that range from online brokers taking discount orders to expensive full-service brokers and money managers (Deaf 112). Regardless of the type of broker an investor chooses, the stock market has the potential to generate high returns through an investment strategy. One of the main strategies used is diversification which involves purchasing different stocks with varying performance and rates of return in order to spread the risk of individual stocks in a portfolio. Investing in stocks is therefore one of the most profitable alternatives in personal financial planning and should be considered as one of the investment vehicles that generate an additional income stream. Importance of Stocks in Personal Finance Personal income is considered as the total income of a person which can be obtained through wages, personal business activities, welfare and investments. Choosing to invest one's finances rather than spending on consumption has the overall impact of increasing income due to future cash inflows from investment...... middle of paper ...... g is also important in fulfilling financial obligations. obligations such as loan capital, annuities and savings. An effective personal financial plan must manage risk through diversification of investment capital, and the stock market provides investors with a viable option for diversification. Stock investing is considered one of the most profitable alternatives in personal financial planning and is commonly included in financial plans as an investment vehicle for additional income streams. Investing in stocks also has several benefits, the main one being increased current and future cash flow from investments. Additionally, stocks provide investors with a viable option through which they can achieve their financial goals regarding retirement, savings or consumption. Stocks are therefore useful securities that can be used to create wealth and provide financial stability..