The Advantages of Common Stockholders

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Common stock has many advantages.
Common stock has many advantages. (Image: wall street with flag image by Tomasz Cebo from Fotolia.com)

Purchasing common stock may be of excellent advantage to an investor depending on the company and the investor involved. The stock market forms a vital role in the modern economy, helping to fund projects of numerous kinds while creating wealth for individual investors as well. The wealth and well-being of society as a whole has been improved through the issuance and purchase of stock. Common stockholder advantages are many.

Investment Returns

Common stocks have the potential for immense returns. Unlike other investments such as bonds, common stock returns per year are often more than the price of purchase. If an investor is wise with his investment a stock may produce enormous wealth over the course of a lifetime. The returns on a stock purchase may be completely disproportionate to the actual price of the purchase. Many have gotten wealthy from the stock market in the past.

Risk

There is little to no risk involved in the purchase of common stock. The most that an investor has to lose is the cost of purchase for a stock. This is unlike almost any other kind of investment with large returns. There is a very high upside to a stock purchase and a very low downside. If a company completely fails and goes bankrupt there may still be a payment coming to its stockholders.

Liability

Unlike other forms of ownership, the purchase of a common stock has no legal liability attached to it. While enjoying the privileges of ownership, common stock holders are not likewise held responsible for any of the actions of a company. Other investors in a business may be brought to court if the company is found to engage in illegal activity or goes bankrupt. Common stock holders have none of this concern, giving them great advantage.

Selling Stock

Some of the biggest gains from the purchase of stock are made when it is sold to another investor. The price of a stock may swing wildly, giving great opportunities to investors. If an investor has made a wise purchase the price of a stock will rise. Stock may be sold very quickly with little work involved as there is already a sophisticated and reliable system set up to do so in the stock market.

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