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Advantage of common stock investment

1. What are four main advantages of investing in common stock?

2. Why should investors consider common stock as investment vehicle if they have a long-term time horizon?

3. Explain the difference in taxation between stock dividend income and bond interest income.

4. What is a capital gain? Is it taxed the same way as dividends?

5. Describe some of the characteristics of common stock.

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1. What are four main advantages of investing in common stock?

The four main advantages of investing in common stock are that it gives you the protection over time against the increase, it offers the opportunity for growth in values, it also offers the opportunity for growth in income, and it also has tax advantages.

2. Why should investors consider common stock as investment vehicle if they have a long-term time horizon?

Studies of investing patterns have revealed that in the long term, common stock, via capital growth, yields higher returns than almost every other investment. This higher return comes at a cost, because common stock carries the greatest risk. In case the company goes bankrupt and liquidates, the investor holding common stock shares will not receive money until the creditors, bondholders, and preferred shareholders are paid.

Source: http://www.stockmarketinvestinginfo.com/smi_commonstock.html

3. Explain the difference in taxation between stock dividend income and bond interest income.

Stock Dividend Income
A stock dividend issued by a Canadian resident corporation is eligible for the dividend tax credit, the amount of the dividend normally reflected in a T5 slip issued by the corporation. There is no dividend tax credit eligibility for ...

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