How often do stocks become worthless?
I just wanted to know because I've had the notion that generally, a stock's price will rise over a long time. Yet, sometimes they don't. I'd like to know how likely it is historically that a randomly selected stock becomes worthless. (not that I would pick at random, but no matter how much I study a company, I won't know what happens in the future. So there's still an element of randomness.) I have no idea where to look for this kind of info.
One more side question: What causes a stock to become worthless? Is bankruptcy the only reason a stock becomes worthless? If the stock gets de-listed does that make it worthless?
Thanks in advance!
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Randomly selected stocks would probably become worthless at a similar rate of all businesses going out of business do. I'm not sure why you'd randomly select a stock though. Stocks in the S&P500 (or other similar index), or large-cap stocks probably become worthless at a much lower rate.
The only thing that makes a stock worthless is when the company goes out of business. Note that bankruptcy, by itself, does not mean the company is closing. It could successfully restructure its affairs and come out of bankruptcy with a better outlook.
Being a small or unprofitable business may cause a company's to trade in the "penny stock" range, but there is still some value there. Since most dying companies will pass through the penny stock phase, you may be able to track down what you're looking for by finding companies who have been (or are about to be) delisted. Delisting is not death, it's just the point at which the company's shares no longer meet the qualifications to be traded on a particular exchange.
If you find old stock certificates in your grandmother's sock drawer, they may be a treasure, or they may be worthless pieces of paper if the company changed its ownership and Grandma didn't know about it.
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