Which security typically provides voting rights and potential for capital gains, representing ownership in a company?

• A. Common stock
• B. Bond
• C. Preferred stock
• D. Money market fund

Answer: (A)

Owning common stock means you actually own a piece of the company, which gives you a voice in corporate matters through voting on issues like elections to the board and other significant decisions. It also carries the potential for capital gains because, if the company grows and its profits rise, the stock price can increase and you can sell your shares for more than you paid. Dividends are possible too, but they’re not guaranteed and depend on the company’s profitability.

Bonds are loans to the company or government entity; they pay fixed interest and return the principal at maturity, but you don’t own the entity and typically don’t have voting rights. Preferred stock sits between common stock and bonds: it often pays fixed dividends and has priority over common stock in getting those dividends or in liquidation, but it usually doesn’t come with voting rights. Money market funds are cash-equivalent investments that don’t confer ownership or voting rights in a company; they aim for liquidity and safety rather than growth through capital gains.

So the security that provides voting rights and potential for capital gains, representing ownership in a company, is the common stock.