Corporate Equity Ownership
About Common Stock
Common stock is a form of ownership of corporate equity. This means that if you own common stock in a company, you are a part owner of that corporation. Common stock can be bought from a broker or on on-line trading sites such as ETrade or TD Ameritrade. There is a large range of risk when it comes to investing in common stock.
Why should I buy Common Stock?
Common stock allows you to theoretically make an infinite amount of money, while on the same hand, it allows you to lose 100% of the money that you invest. As an indicator, the S&P 500 over the course of the past 10 years, from October 2004 to October 2014 has grown close to 64%, meaning if you invested $10,000 in an index fund, your investment would now be worth close to $16,400. A $6,400 profit not including fees, taxes, and inflation.
What Makes Common Stock Different from Preferred Stock?
Preferred stock is more stable but does not allow to same profit potential as common stock. It guarantees dividends, while common stock does not. Owners of preferred stock get priority when it comes to dividends. Also, if a company goes bankrupt, the owners of preferred stock with receive priority distribution of the company's assets. Despite these benefits, preferred stock holders do not get and voting rights in the company that you would own, while common stock gives you that right.