Question

Why do individuals or entities choose to invest in the capital stock of corporations?

Answer 1

Investing in capital stock of corporations helps to increase the wealth in two potential ways-

1. If the stock price increases

2. If the investors are paid dividend by the corporations

Investing in capital stock is a popular strategy where buyer/investor becomes the owner of the corporation.

When the investor believes a company is financially strong, they expect prosperity and growth. An investor attempts to buy the stock at low price and sell it later at a higher price.

In many cases, The investors are also paid cash dividends. These are rewards for being the owner of the business that is growing. It is a share from the profit and these dividends are decided by the board of directors.

Another insight as to why individual or entities choose capital stock is to have a diverse portfolio of investments and to invest in liquid assets. Capital stocks can be quickly turned into cash.