WHAT ARE SOME ADVANTAGES OF OWNING COMMON STOCK?
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The biggest reason people invest in common stock is their
personal financial bottom line. Over time, nothing has so reliably appreciated
in value as common stock. Despite downturns, recessions, and even a few serious
crashes, the stock market has continued to climb since the New York Stock
Exchange opened its doors in 1792. While you may not get rich as quickly and
painlessly as discovering oil in your backyard, the stock market has continued
to provide an overall annualized growth rate over 10 percent over time?with some
stocks performing even better.
In addition, we've noted a few other advantages earlier in this
rights in company elections
? Ability to participate in company earnings through
But that's not all. Another big advantage of owning common stocks
is their ability to provide a hedge against inflation?unlike bonds and certain
other investments that can lock you into low interest rates. The prices of
stocks tend to move up right along with the rest of the economy.
Finally, owning common stock can have certain tax advantages. For
instance, a capital loss can be used to offset capital gains. You may want to
check with your tax professional for details
Naturally, there also are a few disadvantages to owning
common stock. We will cover those next.