Benefits of Investing in Stocks

While there are risks to investing in the stock market, there are also many benefits, and the potential benefits of investing in stocks often far outweigh the risks. Stocks also offer benefits that fixed investments cannot match.

Upside Potential

If you buy a position at one price, and in five years the price doubles, as long as you still own that stock, you benefit from the growth. When you invest in stocks and keep them in your portfolio long term, you are exposed to tremendous upside potential.

Stockholder Voting

As a stockholder, you have voting rights. You can vote to elect certain directors, obtain loans and other funding, and participate in many other corporate events. You are often more powerful in the inner workings of a company as a stockholder than as a consumer.

Dividends

When you own a stock and the board decides to issue a dividend to stockholders, you are eligible to receive the dividend.

Corporate Actions

Companies sometimes buy back shares at a higher than market price from their investors in order to fund employee retirement accounts. A buyback is just one of the corporate actions (like tender offers and dutch auctions) that shareholders can take advantage of.

Step Up in Basis to Beneficiaries

If you die and you pass on your stocks to your family, their cost basis receives a "step up" and can be increased to the value of the stock on the date of death. This can decrease their tax liabilities at a later date.