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Stocks 101: Stocks versus Other Investments

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1.
What is perhaps the main reason to invest in stocks as opposed to other investments?
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They provide the highest potential returns. In fact, over the long term, no other type of investment performs better.
2.
Over the long term, which investments provide the lowest real (inflation adjusted) returns?
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Savings accounts. Savings accounts provide the lowest real (or inflation adjusted) returns over the long term.
3.
Buying shares of stock in a company gives you ownership in that company.
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True. Stock is about ownership (also called equity) and all the benefits of that ownership.
4.
A good way to minimize the effects of bad timing in stock choices is to invest for the short term.
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False. A good way to minimize such effects would be to invest for the long term instead, since volatility tends to iron itself out over time.
5.
Which of the following investments are the most volatile in their pricing?
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Stocks. Stocks are the most volatile. Over the long term, stocks have a higher return than bonds or savings accounts. But this volatility means that over the short term, other types of investments may significantly outperform stocks.