Buying Common stocks advantages and disadvantages

Common stocks advantages and disadvantages are frequent. In the past 8 years almost anyone who bought equities on the stock market when it hit bottom in 2008 has more than doubled their investment. Gains in the value of the equities as well as income from dividends has outperformed almost any other investment.

Some of the advantages and risks associated with stocks include income from dividends, growth opportunities, diversity of investments and being able to sell your investment quickly. Before you invest in the stock market, many investors believe that buyers should develop a strategy that matches their objectives and their tolerance for risk. If an investor cannot stomach the volatility of the stock market, equities or stock might not be the right investment vehicle for you.

Strategy for Common stocks advantages and disadvantages

A typical investment strategy which considers common stocks advantages and disadvantages could be as follows:

Blue chip – invest in high quality companies that have been around for many years, pay  dividends on a regular basis and have a strong future in the industry they are in.

Income – If you need income, dividend paying stocks have advantages. Some companies have a history of increasing dividends every year. They perform much better than GIC’s and other fixed investment income vehicles.

Dividends – Companies pay a dividend every 3 months to the stock holder. Many pay cash direct to the investors account. Many companies also allow re-investment of the dividend into the same stock. This is an excellent way of avoiding any broker charges and growing your investment at the same time.

MER – is the fee charged by mutual fund companies for managing the fund. You pay this fee regardless of whether the mutual fund performs well or not. Investors should decide if they want someone managing the investment for them and what they are willing to pay for the service.

Diversity – Never place all of your money into one investment – stock, mutual fund or GIC. Diversify your investments across several stocks in various industry segments.

Risk – the market is considered high risk. There have been significant upticks and down ticks in the market over the years. This is both an advantage and a disadvantage of common stock investing.

For more information about stock dividends, click here.