Reasons to Buy Stock

by Jennifer Leighton ; Updated July 27, 2017
Buying stocks may offer both short and long term financial benefits.

Reasons to buy stock vary with each person, but in many cases the financial benefits are the main attraction. The stock market may often be a risky investment, but the payoffs can be equally as large as the risk. There are reasons to buy stock at any time, regardless of the current economy, since stock can be both a short term or a longer term investment.

Stocks Are Liquid

Stocks are a type of asset that remain "liquid," or rapidly converted into cash, at all times. Some investments, such as bonds, cannot usually be changed into cash quickly. Stock buyers have the advantage of selling stock shares any time that money is needed.

Stocks Pay Dividends

Portions of the company's earnings, called dividends, are paid to stockholders regularly. These dividends do not in any way decrease the amount of stock owned, but are extra income. According to Jeffrey R. Kosnett, Senior Editor at Kiplinger's Personal Finance, "cash dividends represent money in your pocket now and don’t depend on the ups and downs of a stock."

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Stocks Make More Historically

Stocks have historically proven to have the best return on investment in the financial world. Since the end of World War II, the average big stock has shown a gain of about 10% per year. That places stocks well above the rate of inflation, and above the rate of return for savings bonds, real estate, and other types of investments. Stock investment is, therefore, the most effective way to save funds for long range goals, according to CNNMoney.com.

Retirement Planning

Stocks can be a good retirement planning tool, especially for younger investors. Because stocks tend to show a good rate of return over the long term, they are an ideal investment for anyone who is able to leave their money untouched for a long time, especially 20 years or more. In the years from 1926 through 2010, there was never a time when stocks consistently lost money for 20 years or more, according to CNN Money.

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