Historically, investments in the stock market have experienced the greatest return. They have performed better than all other types of investments in the long run, but have a tendency to fluctuate from time to time. Analysts have found that stocks have held their position as giving the greatest return for a period of several decades. Between 1925 and 2007, stocks' returns were positive for 53 of the 82 years and negative for 29 of the 82 years. Stocks have tended to do better than bonds by a margin of 2 to 1 since approximately the beginning of the same period. While bonds have traditionally been viewed as a more steady financial investment, they can still fluctuate in much the same manner as a stock.

Investors who purchase stocks acquire a portion of ownership in the corporation. Investors can buy either common or preferred stock. Common stockholders receive dividends and have voting rights at shareholders' meetings. Preferred holders lack these voting rights but take priority over common holders in terms of assets and earnings.

Historical returns can be defined as the way in which a security or an index has performed in the past. Financial analysts examine the data to predict how a security is likely to perform in the future. The same data may also be used to predict how consumer behavior may affect the security. While the past performance of a security is sometimes useful in predicting future behavior, experts caution that it is never a guaranteed method. The general rule is that the older the data is, the less useful it is in predicting near-future behavior and as a guide for future investment decisions.

  1. What is the difference between preferred stock and common stock?

    Preferred stockholders have a greater claim to a company's assets and earnings than common stockholders, but may not have ... Read Answer >>
  2. Where can I find historical stock/index quotes?

    Finding historical quotes on stocks and indices online has never been easier. Use Investopedia's historical data tool for ... Read Answer >>
  3. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares, and why investors might value them more than common ... Read Answer >>
Related Articles
  1. Investing

    4 Benefits of Holding Stocks for the Long Term

    Discover some of the benefits that come from buying and holding stocks for longer periods of time, such as tax savings and risk minimization.
  2. Investing

    Stocks Are No.1

    Historically, stocks provide the highest returns - but only under certain conditions.
  3. Investing

    Why stocks outperform bonds

    Why have stocks historically produced higher returns than bonds? It's all a matter of risk.
  4. Managing Wealth

    Taking The Bite Out Of A Bear Market

    Find out which financial instruments will protect you from bear market volatility.
  5. Trading

    Understanding Investor Behavior

    Discover how some human tendencies can play out in the market, posing the question: are we really rational?
  6. Investing

    Projected Returns: Honing The Craft

    Find out how to forecast long-term returns on the three major asset classes.
  7. Financial Advisor

    Get This: Bonds Beat Stocks After All

    Data shows that long-term Treasury securities have actually outperformed the S&P 500 over the past 10 years.
  1. Stock

    A form of security that indicates the holder has a portion of ...
  2. Common Stock

    Common stock is a security that represents ownership in a corporation. ...
  3. Predictive Analytics

    Predictive analytics include the use of statistics and modeling ...
  4. Behavioral Modeling

    Behavioral modeling means using available and relevant consumer ...

    Shares are a unit of ownership of a company that may be purchased ...
  6. Perpetual Preferred Stock

    A perpetual preferred stock is a type of preferred stock that ...
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center