What are the disadvantages of investing in common shares?

Investing in common shares comes with several risks, and one significant disadvantage is that shares can indeed become worthless if the company becomes insolvent. When a company faces financial difficulties and is unable to meet its obligations, it may file for bankruptcy. In such cases, common shareholders are last in line to receive any payout after creditors and preferred shareholders. If the company's assets are insufficient to cover its liabilities, shareholders can lose their entire investment, meaning the value of their shares can drop to zero.

The other options present scenarios that do not accurately reflect the nature of common stock investments. While dividends may be issued, there is no guarantee they will always be paid, as companies often choose to reinvest profits back into the business rather than distribute them to shareholders. Regarding market risks, investors who hold common shares are indeed exposed to market fluctuations and economic conditions that can negatively affect stock prices, meaning they do face market risk. Lastly, returns on common shares are tied to company performance and market conditions and cannot be guaranteed to be high, as stock values can decline as easily as they can rise. Thus, the potential for shares to become worthless represents a critical risk for investors.