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Can an ordinary person benefit from the historically high rate of return derived from stock...

Question:

Can an ordinary person benefit from the historically high rate of return derived from stock ownership without taking excessive risk? Explain.

Stock Market

The stock market serves as a market for buyers and sellers of the stocks which actually represent the claiming of stockholders over the company?s assets and liabilities. There are two types of market that are Primary Market and the Secondary market.

Answer and Explanation:

Since a person can get benefit from the high rate of return from stock ownership without taking an excessive risk by the way of mutual funds. Mutual funds help in diversification of investor?s risk as it is a way to not put all investments in one firm. It provides maintenance of balancing between the investments worth of high risk and low risk. So, it provides a cost-saving method for small investors.

The type of mutual fund, that is, Indexed Equity mutual fund that provides the holding of the portfolio of stocks which matches with the weights in given stock market indices that is the S&P 500. As it incurs a low overhead cost in the context of stock trading and research because there is no cost existence of hiring the employee for research.


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How to Reduce Investment Risks

from Finance 305: Risk Management

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