PBCs: what to know

Motley Fool

What are “PBCs”? — S.F., St. George, Utah

You probably know about not-for-profit organizations and about regular for-profit companies. Public benefit corporations, or PBCs, are a relatively new kind of legal entity authorized in around three dozen states. They are permitted to pursue profit, but they’re also permitted to take the public good into consideration when making decisions. Indeed, they’re generally required to consider all stakeholders — including shareholders, customers and employees -- when making decisions. The rules regarding PBCs vary by state, but they often give directors of a company the ability to act toward the greater good with some protection from liability.

Some well-known PBCs include apparel company Patagonia, shoe company Allbirds and fundraising enterprise Kickstarter.

Is it better to invest money for my kids in stocks or in savings bonds? — H.K., Pierre, South Dakota

It all depends on how long the money will be invested. If you plan to withdraw it within a few years, perhaps for college, you should stick with relatively low-risk investments such as savings bonds or CDs. They offer modest returns and should minimize losses.

If the money will be invested for at least five (or better, 10) years, consider stocks, which tend to outperform bonds and CDs over long periods. A simple, low-fee index fund, such as one that tracks the

S&P 500, will instantly spread your money across hundreds of large companies.

You might also invest at least a little money in the stock of some companies that your children know and like, such as Apple, Walt Disney, Target, Nike, Starbucks or Hasbro. If you follow the progress of such companies over time together, you can spark an interest in business and investing.

Stock investing tips

It’s possible to make a heck of a lot of money investing in stocks, but for best results, you should know what you’re doing. Here are some tips for investing in individual stocks.

Rein in your emotions:

Buying stocks out of greed and selling them when you’re afraid is a recipe for disaster. Only buy when you’ve studied a company, understand its risks and opportunities well, and think it’s priced attractively. When the market swoons, as it will now and then, that’s a great time to buy more stock, instead of selling.

Don’t avoid boring stocks: Many companies are exciting, but you ignore boring ones at your own peril, because they may be very profitable. Warren Buffett’s Berkshire Hathaway, for example, encompasses many subsidiaries, but its main businesses are insurance, energy and manufacturing. Banks can be great money-makers, and real estate investment trusts (REITs) can grow while paying generous dividends.

Pay attention to a company’s valuation:

Many companies are terrific, but some of them are priced steeply these days. Look for companies with price-to-earnings (P/E) or price-to-sales (P/S) ratios below their five-year averages, or well below those of their peers.

Read up on stock investing (including valuation):

It’s best to keep reading and learning throughout your investing life. If you prefer to keep things simple, you could buy few or no individual stocks, and just stick with low-fee, broad-market index funds such as those tracking the

S&P 500. Keep adding to your index funds over time, and you should do quite well, earning roughly the same return as the index.

You can learn more about money management, and find a good brokerage, via our TheAscent.com site.