Investing your hard earned money in stock market looks risky at first, especially for a beginner. But the stocks have many advantages over other types of investments if you can balance the risk. The stakes on shares are not like an FD where there is a fixed return, there will be ups and downs so a greater understanding and investing in the right stock is critical. Click here to learn more about stocks that can make you money, the benefits that you can get when you invest wisely far outweigh the risks.
Listed below are some of the advantages of investing in stock market. Find the full list here.
High return: Investing in right stocks can earn very high profits. Though some skeptics consider it as a risky asset, if the long-term trend is taken into consideration, the returns are on the upswing. When invested for a long-term they give you the best performances over other investment options. Federal Reserve states that the stock market has grown by 10% on an average for the past five decades, whereas the bonds provided by the government has increased by only 5%. If you can balance your stocks and patiently wait for the markets to go up when it is down, then you can earn good returns on your money.
Income diversification: If you are looking for different types of investment, a stock market can help you diversify investment. The value of a stock market is not dependant on other markets like the real estate or the bonds. When you expand your income by investing in stocks, even if there are losses in other investments, holding a stock can help you ride out of those losses. A well-chosen stock can get you substantial gain and helps you to invest in less risky or more conservative investments.
Provide liquidity: The shares are sold and bought daily, and hence stocks offer you liquidity when you need them. If you are in need of cash, you can quickly sell your shares to other buyers. The same is not true when it comes to other investments like property. You will need many months to find a buyer and get the money. When you have stocks, you can get cash immediately.
Many stocks provide income in the form of a dividend, an annual payment is made to the investors. That payment is irrespective of the stock losing its value, this means apart from the profits that you make when you sell the shares, you are getting extra money yearly. The dividend income can be used to fund other stocks that can grow your portfolio. Note that not all stocks offer dividends.
Ownership: When you buy a specific number of shares of a company, that means you are a part owner where you purchase stock. You will then be entitled to all the benefits that a business owner of that company has. As a shareholder, you get to vote and be part of business decisions based on the company policy. When you own the stocks of a company, the success of the business can help your personal finance.