The Benefits You can get from Common Stocks

The Benefits You can get from Common Stocks

When people talk about stocks and the stock market, they are referring to common stocks. As the name suggests, common stocks are the most common stocks found in the stock market. For many younger investors, investing on common stocks is a way for them to see the larger picture in the stock market Finance Brokerage Economic Calendar.

On the other hand, just like many other good investors, there are good and bad sides to the stock market. The decision whether the situation is good or bad for you depends on where you are standing in the field that you are in.

Ownership Equity

When you own equities, you’re bound to have the highest return in the longer run, assuming that the stock or company doesn’t go out of business. Compared to bonds or certificates of deposit, common stocks have provided more than 6 percent real rate of return, making it one of the best ways to be one step ahead of inflation Finance Brokerage Forex News.

Limited Liability

This simply means that your liability will be limited to the amount of your investment. If you invest $1,000 in a firm or a corporation, then that’s the most amount you will lose. This is a good thing if in any case your investment goes against you or goes not according to plan, or the business gets sprinkled with debt.

Liquidity

Common stocks are very liquid, which means you can sell them anytime if you want to cash out and lock in the profits you have gotten. Liquidity also means that you can buy more stocks easily if you think the value will rise in the near term or you simply just want to grow your investments. In addition, you can buy common stocks at a very reasonable cost under normal market conditions.

Capital Appreciation and Growth

Many people invest in common stocks for one simple reason, which is that they want to increase the value of their money. Investors in a common stock target to acquire the stock at a lower cost to eventually sell it at a higher price.

Dividend Payments

Companies sometimes distribute or pay a part of their income to their investors in dividends when their earnings exceed what they need in order to cover the maintenance and growth they are aiming for. The distribution of earnings means profits for the investors. When the company decides to do such thing, investors usually receive dividend payments periodically.

High potential Income

Common stocks provide a better chance to generate bigger return on investment. And since return on investments are guaranteed, you can determine the minimum as well as the maximum amount you can accept to gain from them.

What about preferred stocks?

On the other hand, there’s also another kind of stocks for investors to consider. And they are called preferred stocks. Preferred stocks also offer valuable advantages for investors. For one, they provide more regular dividend payments, whereas some common stocks do not pay any dividend at all. Preferred shareholders are also generally the priority in case the company goes bankrupt.

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