Sunday, 18 December 2016

The Advantages of Stock Ownership

1.  Possibility for substantial returns

One reason stocks are so appealing is the possibility for substantial returns that they offer.

Stocks generally provide relatively high returns over the long haul.

Common stock returns compare very favourably to other investments such as long-term corporate bonds and U.S. Treasury securities.

Over the last century, high-grade corporate bonds earned annual returns that were about half as large as the returns on common stocks.

Although long term bonds outperform stocks in some years, the opposite is true more often than not.

Stocks typically outperform bonds, and usually by a wide margin.

Stocks also provide protection from inflation because over time their returns exceed the inflation rate.

In other words, by purchasing stocks, you gradually increase your purchasing power.

2.  Ease of buying and selling

Stocks are easy to buy and sell, and the costs associated with trading stocks are modest.

3.  Information easily available

Information about stock prices and the stock market is widely disseminated in the news and financial media.

4.  Cost to own stocks is low.

The unit cost of a share of common stock is typically fairly low.    

Unlike bonds, which normally carry minimum denominations of at least $1,000 and some mutual funds that have fairly hefty minimum investments, common stocks don't have such minimums.

Most stocks are priced less than $50 a share and you can buy any number of shares that you want.

Additional notes:

Investors own stocks for all sorts of reasons:
1.  the potential for capital gains,
2.  their current income, or
3.  perhaps the high degree of market liquidity.

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