Behavioral Economics and Finance Stocks

Behavioral Economics & Finance
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Behavioral Economics & Finance
According to Seigel (2020), stocks are securities representing ownership percentage in the company; therefore, entitling the shareholder to some company's profits and assets that equals the amounts of shares held. For instance, if a company has one million shares, and one individual owns 100,000 shares, that individual claims 10% of the company's assets and profits. They are bought and sold at stock exchanges and through private sales. Corporations normally sell stock to raise funds for their operations. I am interested in stocks due to their benefits, although it's risky and may lead to huge losses. Some risks can be managed; hence there is a higher probability of positive returns.
Stocks provides an opportunity to grow wealth (Keller, 2006). Over time, the value of stocks and securities tends to increase, although there’s a daily rise and fall in the value of individual stocks. Investment in stable companies that have positive growth tends to bring more income to investors. Additionally, investing in different stock and companies build investors wealth due to diversified profits even if individual stocks fall.
I also invest in stocks because some stocks and securities provide income in the form of dividends, although not all of them. Such dividends are paid even if the stocks invested lose value. Such income can be used to buy more stocks or receive it as cash to fund other investments. Dividends and capital gains attract fewer taxes than other income streams, such as interest income from bonds and employment income (Seigel, 2020). Although taxes and inflation affect wealth accumulation, stocks give investors better treatment in the long-term, hindering both inflation and taxes' adverse effects.
Common shares can be quickly and easily sold or bought compared to other investments such as real estate; therefore, an individual can buy shares or sell them at relative ease. Owning a stake in a company means...