Final answer:
The main advantages of common stock investments for most stockholders are the potential for high returns and the benefit of active trading which offers high liquidity. Higher risks are associated with these returns, especially in the short term. Investors must balance these elements with their personal circumstances, such as their stage in life. The correct answer is option: a) attractive returns and active trading.
Step-by-step explanation:
To most stockholders, the main advantages of common stock investments are attractive returns and active trading. While investing in stocks, the expected rate of return over an extended period can be high, it comes with correspondingly high risks, especially in the short run.
Another key advantage is the high liquidity, which allows investors to sell their stock in publicly held companies quickly for spendable money. Mutual funds also play a role for investors seeking to balance risk, as they aggregate investments and manage funds on behalf of the investor, reducing transaction costs and sometimes risk.
It’s crucial for investors to consider the tradeoffs between risk and return, particularly in relation to their life stage. A person closer to retirement might prioritize security and stable income, whereas a young worker with a long horizon until retirement might be more inclined to endure short-term volatility in the stock market for the potential of higher long-term returns.