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. How does preferred stock differ from company issued bonds?

    Discover the primary differences between preferred stock and corporate bonds, two income-generating investment vehicles issued ... Read Answer >>
  2. What's the difference between the equity market and the stock market?

    The terms equity market and stock market are synonymous. Read Answer >>
  3. What is the Difference Between Preferred Stock and Common Stock?

    Understand and explore the advantages and disadvantages of owning preferred stock as opposed to owning common stock shares ... Read Answer >>
  4. What are the types of share capital?

    Companies obtain share capital by selling ownership shares to the public. The two types of share capital are common stock and preferred ... Read Answer >>
  5. 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. Financial Advisor

    A Quick Guide On Behavioral Funds

    Investopedia explores the working of behavioral funds, their benefits and risks, and an analysis of their past returns.
  3. Investing

    A Market Prediction From a Hesitant Predictor

    It is much better to focus on investment planning than market predictions.
  4. Investing

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  5. Managing Wealth

    The Different Between Preferred and Common Stock

    Preferred and common stocks are different in two key ways.
  6. Investing

    Why Stocks Outperform Bonds

    Why have stocks historically produced higher returns than bonds? It's all a matter of risk.
  7. Investing

    What You Should Know About Preferred Stocks and Interest Rates

    These are the pros and cons of preferred stocks in a rising interest rate environment.
  8. Investing

    How to Pick Your Investments

    Understanding the basics doesn’t take long. However, mastering the nuance of every available investment could take a lifetime.
  9. Investing

    What Returns Can You Expect in the Stock Market?

    Looking at the historical returns of the stock market helps you understand current stock returns.
  1. Historical Returns

    Historical returns include the tabulation and analysis of past ...
  2. Predictive Analytics

    The use of statistics and modeling to determine future performance ...
  3. Preferred Stock

    A class of ownership that has a higher claim on assets and earnings ...

    Shares are a unit of ownership of a company that may be purchased ...
  5. Return

    A return, in finance, is the profit or loss derived from investing ...
  6. Holder Of Record

    The name of the person who is the registered owner of a security ...
Hot Definitions
  1. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  2. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  3. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  4. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  5. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
Trading Center