Successful Investment Stocks Assignment Example | Topics and Well Written Essays - 750 words

Successful Investment Stocks - Assignment Example There is no comparative comparison of returns between stocks and bonds as returns from stocks outperform those of bonds with significant percentages. This has been proven from studies conducted over a long period of time (Sorkhou 53). Purchasing stocks in a public company give an investor the opportunity to possess fractional ownership of the company. In essence, the investor has the opportunity to share in the success of the company through the share portion held in the company. An increase in the share prices of the company has a positive correlation to the value of the shares held in that particular company as they increase in value. If an investor chooses to sell shares thus held in such a company, the profits accrued will be higher than the purchase price of the shares. Moreover, the dividend payment is an advantage of holding shares in a public company. Although not all companies pay dividends to their shareholders, those that may create more income opportunities for their investors. Additionally, the stocks keep increasing in value, giving the investor a double advantage. Stocks give investors the advantage of diversification, which enables them to spread their risk, and therefore they do not have to put all their investments on the success of a single investment. While considering investing in stocks, laypeople are advised to do so with a highly diversified index fund. The various benefits accrued from a highly diversified index fund make the arrangement more appealing to individual people than going it alone. An index fund gives the group the ability to hire professional investment managers who theoretically offer them with information on the best investment options available. Additionally, there are benefits of economies of scale through cost-sharing among a group of investors.  Ã‚