What Are the Benefits of Buying Stocks?

by Jennifer Leighton ; Updated July 27, 2017
Buying stocks may give advantages such as dividends.

Stocks have often been shown to hold value for the long term, and may sometimes even be a way to make a quick buck. The stock market can be volatile, unlike other investments such as bonds. This greater risk does, however, give a chance of greater return: One of the primary benefits of stock investing. From the year 1926 to 2010, the average yearly return on common stock investments has been +10.3%, according to John C. Bogle, founder and retired CEO of The Vanguard Group and author of "Common Sense on Mutual Funds".

Cash Benefits Via Stock Dividends

Stock dividends, a share of the stock's earnings, are often distributed to stockholders on a regular schedule. Buying stocks will, in many cases, give the advantage of having some cash income while still owning the stock. Dividends may increase over time, based on the performance of the stock.

Liquid Assets

Stocks are what is known as a liquid asset. Essentially, this means that stocks will not be tied up and unsaleable, like financial investments such as certificates of deposit may be, if it becomes necessary to sell them quickly. It is possible to buy stock shares and then sell them on the same day, although in some cases a loss may be taken.

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Limited Liability

Stock ownership is typically a passive type of ownership. A stockholder has the advantage of being part owner in a company without having any risk beyond their financial investment, even though company ownership for principal stockholders and company owners are responsible for the company financially. If a stock investment were to fail, the stockholder will not be required to pay for any of the company's losses and will lose only the money invested.

Photo Credits

  • Stock Market Crash image by Paul Heasman from Fotolia.com
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