GOOG vs. GOOGL: Which Should You Buy? (An Introductory Guide)
Google’s parent company, Alphabet Inc., offers two classes of stock: GOOGL (Class A) and GOOG (Class C). This often confuses new investors, leaving them wondering which is the better investment. While both track the same underlying company and generally move in tandem, there’s a key difference that could sway your decision.
The Crucial Difference: Voting Rights
The primary distinction lies in voting rights. GOOGL shares carry one vote per share, granting shareholders a say in company decisions. GOOG shares, on the other hand, have no voting rights. This means Class C shareholders have no direct influence on electing board members or influencing corporate policy.
Why the Two Classes?
Google created the dual-class structure during its 2014 stock split to maintain control for its founders and key insiders. By issuing non-voting Class C shares, they could raise capital without diluting their voting power. This strategy is common among tech companies seeking to maintain a long-term vision without potential interference from short-term focused investors.
Which Stock Performs Better?
Historically, the performance of GOOG and GOOGL has been very similar. They typically trade at near-identical prices, with any discrepancies generally being minimal and short-lived. The non-voting nature of GOOG hasn’t significantly impacted its market value. This suggests that for most investors, the voting rights difference doesn’t translate into a tangible financial advantage.
So, Which Should You Buy?
The decision ultimately depends on your individual priorities:
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For most investors: GOOG is often the simpler choice. Since the price difference is usually negligible, and the performance is practically identical, opting for the slightly cheaper option (if there is one) makes sense. The lack of voting rights is unlikely to materially affect your returns.
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For investors who value corporate governance: If you want to have a voice in company affairs, however small, GOOGL is the only option. This is particularly relevant for investors with a large stake in Alphabet.
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For cost-conscious investors: Pay attention to the slight price fluctuations. If one class is trading at a discount, even if minimal, it might be the more economical choice.
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For long-term buy-and-hold investors: The long-term performance of both classes is expected to remain similar. Therefore, the choice boils down to your personal preference regarding voting rights and potential minor price differences.
Beyond GOOG and GOOGL: Class B Shares
There’s also a Class B share (GOOGBV), not publicly traded, which holds super-voting rights, primarily held by Google’s founders and insiders. This further solidifies their control over the company.
In Conclusion:
The choice between GOOG and GOOGL is less about financial performance and more about your personal investment philosophy. For most investors, the lack of voting rights in GOOG won’t be a significant factor. However, if you value shareholder participation, GOOGL is the way to go. Regardless of your choice, investing in either class provides exposure to one of the world’s most innovative and influential companies. Remember to research and consult with a financial advisor before making any investment decisions.