Investing in stocks involves owning a part of the capital of a company which effectively allows the shareholder to receive a part of the company's profits and assets in the form of dividends. Stocks are generally classified as common stocks or preferred stocks, where common stocks allow investors to vote on key issues but do not guarantee dividends (Markowitz 78). Preference shares, on the other hand, do not give voting rights but ensure the payment of dividends to shareholders. Investing in stocks offers investors relatively high returns compared to Treasuries, but investments also have high inherent risk. Stocks are purchased through licensed stockbrokers ranging from online brokers who accept discount orders, to expensive full-service brokers and money managers (Sourd 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 securities with different performance and rates of return in order to spread the risk of individual securities 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 generates an additional income stream. Importance of Stocks in Personal Finance Personal income is considered to be a person's total earnings that can be obtained through wages and salaries, personal businesses, social assistance and investments. The choice to invest one's finances rather than spend on consumption has an overall impact of increasing income as a result of future cash inflows from the investment...... middle of paper ......g is important also to meet financial needs obligations such as debt capital, annuities and savings. An effective personal financial plan should manage risk through diversification of investment capital, and the stock market offers investors a viable option for diversification. Investing in stocks is considered one of the most profitable alternatives in personal financial planning and is generally included in financial plans as an investment vehicle for additional income streams. Investing in stocks also has numerous benefits, the main one being the increase in current and future cash flows from investments. Additionally, stocks offer investors a viable option through which they can achieve their financial goals for retirement, savings, or consumption. Stocks are therefore useful securities that can be used to create wealth and ensure financial stability.