From an investor's perspective, common stocks are among the riskiest of securities.

Question

Quizplus · Accepted Answer

Common stocks are considered risky because their value is directly tied to the company's success, which can be influenced by many factors beyond the investor's control, such as changes in the economy, industry trends, competition, management decisions, and other unforeseeable events. Additionally, common stockholders are typically the last in line to receive dividends or payouts in the event of bankruptcy or liquidation, after bondholders and preferred stockholders. However, with higher risk comes the potential for higher returns, which is why many investors choose to invest in common stocks as part of a diversified portfolio.

From an Investor's Perspective, Common Stocks Are Among the Riskiest