Historically, investments in the stock market have experienced the greatest return. They have performed better than all other types of financial securities in the long run, but have a tendency to fluctuate from time to time.
Analysts have found that equities 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 can vote at shareholders' meetings. Preferred holders lack these voting rights but take priority over common holders in terms of dividends and repayments if the company fails.
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.