![]() ![]() Large company stocks as a group, for example, have lost money on average about one out of every three years. If you are a common stockholder, you get whatever is left, which may be nothing.Įven when companies aren’t in danger of failing, their stock price may fluctuate up or down. The company’s bondholders will be paid first, then holders of preferred stock. ![]() If a company goes bankrupt and its assets are liquidated, common stockholders are the last in line to share in the proceeds. There’s no guarantee that the company whose stock you hold will grow and do well, so you can lose money you invest in stocks. Investors willing to stick with stocks over long periods of time, say 15 years, generally have been rewarded with strong, positive returns.īut stock prices move down as well as up. Stocks offer investors the greatest potential for growth (capital appreciation) over the long haul. What are the benefits and risks of stocks? Penny stocks do not pay dividends and are highly speculative. The very lowest priced stocks are known as “penny stocks.” These companies may have little or no earnings. Shares in very small companies are sometimes called “microcap” stocks. There are large-cap, mid-cap, and small-cap stocks. ![]() They generally pay dividends.Īnother way to categorize stocks is by the size of the company, as shown in its market capitalization. Blue-chip stocks are shares in large, well-known companies with a solid history of growth.People buy value stocks in the hope that the market has overreacted and that the stock’s price will rebound. Value stocks may be growth or income stocks, and their low PE ratio may reflect the fact that they have fallen out of favor with investors for some reason. Value stocks have a low price-to-earnings (PE) ratio, meaning they are cheaper to buy than stocks with a higher PE.An established utility company is likely to be an income stock. Investors buy them for the income they generate. Income stocks pay dividends consistently.A start-up technology company is likely to be a growth stock. They rarely pay dividends and investors buy them in the hope of capital appreciation. Growth stocks have earnings growing at a faster rate than the market average.Preferred stockholders usually don’t have voting rights but they receive dividend payments before common stockholders do, and have priority over common stockholders if the company goes bankrupt and its assets are liquidated.Ĭommon and preferred stocks may fall into one or more of the following categories: There are two main kinds of stocks, common stock and preferred stock.Ĭommon stock entitles owners to vote at shareholder meetings and receive dividends. Enlarging facilities or building new ones.Ability to vote shares and influence the companyĬompanies issue stock to get money for various things, which may include:.Dividend payments, which come when the company distributes some of its earnings to stockholders.Capital appreciation, which occurs when a stock rises in price.Investors buy stocks for various reasons. What are the benefits and risks of stocks?Īdditional information Why do people buy stocks? Stocks are a type of security that gives stockholders a share of ownership in a company. The Laws That Govern the Securities Industry.Researching the Federal Securities Laws Through the SEC Website. ![]()
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