Key Benefits of Investing In Stocks

Why should i invest in the stock market

Video Why should i invest in the stock market

Stocks can be a valuable part of your investment portfolio. Owning stock in different companies can help you grow your savings, protect your money from inflation and taxes, and maximize your income. your investments. It is important to know that there are risks when investing in the stock market. Like any investment, it helps to understand the risk/return ratio and your own risk tolerance.

Let’s look at three benefits of investing in stocks.

build. Historically, long-term stock returns have been better than returns on cash or fixed-income investments such as bonds. however, stock prices tend to rise and fall over time. Investors may want to consider a long-term perspective for their stock portfolio because these stock market fluctuations tend to smooth out over longer periods of time.

protect. Taxes and inflation can take a toll on your wealth. Equity investments can give investors a better long-term tax deal, which can help curb or prevent the negative effects of both taxes and inflation.

maximize. some companies pay dividends to shareholders1 or special distributions. These payments can provide you with regular investment income and improve your performance, while the favorable tax treatment for Canadian stocks can put more money in your pocket. (Note that dividend payments from companies outside of Canada are taxed differently.)

different actions, different benefits

The two main types of equity investments below can offer investors different benefits.

1. common shares

Common stocks are the most common type of equity investment (you guessed it!) for Canadian investors. can offer:

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capital growth. the price of a stock will rise or fall over time. when it goes up, shareholders can choose to sell their shares for a profit.

dividend income. Many companies pay dividends to their shareholders, which can be a profitable source of income for investors.

voting privileges. the ability to vote means that shareholders have some control over who runs the company and how.

liquidity. Common stocks can generally be bought and sold more quickly and easily than other investments, such as real estate, art, or jewelry. this means that investors can buy or sell their investment for cash with relative ease.

Advantageous tax treatment. Dividend income and capital gains are taxed at a lower rate than employment income and interest income from bonds or gics.

2. preferred shares

preferred stock can offer investors the following benefits:

reliable stream of income. Preferred shares typically come with a fixed dividend amount that must be paid before dividends are paid to common shareholders.

higher income. Compared to common stocks, preferred stocks tend to pay higher dividends. (Note: Preferred stock dividends have the same advantageous tax treatment as common stock dividends.)

variety. There are many types of preferred stocks, each with different characteristics. for example, some allow the accumulation of unpaid dividends, while others can be converted into common stock.

the advantages of dividends

Dividends are a way for companies to distribute a portion of their profits to shareholders. Dividends are generally paid in cash quarterly, although not all companies pay dividends. For example, companies that are still growing may choose to reinvest their profits back into their business to help it grow.

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