Advantages of stock investments

People looking to invest money should be made aware of the advantages of stocks over almost every other form of assets. There are advantages, as well as disadvantages, but the benefits clearly outweigh the liabilities as far as stock investment is concerned. The number one benefit of stocks is high returns. Through time, stocks are able to outpace the growth of bonds, real estate and cash investment assets. Stocks promise a return of investment amounting to ten percent annually, versus other forms which offer only 5 to 7 percent per year.

Taxes on stock investments are rated at 15% over long term capital gains. It is not similar to standard tax rates, which is around 35%. Another advantage is the potential of stock investments for diversification. Real estate investments are limited by location. Investments can be made on almost all stocks from any industry, unlike real estate investments which depend on future commercial or residential value. The more diverse the stock investment is, the less likely will an investor suffer from stock depreciation. The opposite is true as well for stocksĀ  that rise quickly.

Therein lies the risk of investing in stocks, and that is the lack of diversification. The less diversified a person’s stock investment is, the higher the risk of stocks going to zero if and when the company goes bankrupt. Expect for that risk, stock investments are in general more promising than other forms of investments, which makes taking such a risk have higher incentives than with real estate.