Investing in the stock market is about learning and making money.
Why choose stocks instead of other options?
It’s always good to invest your money somewhere than to keep it idle. Whether you’re a beginner or a seasoned investor, you can always find a variety of options to park your money. And if you want to invest your hard-earned money for the long-term and earn some good return, stocks are one of many possible ways. Investing in the stock market is about learning and making money. Overall, stocks have tended to rise over the last 100 years, so why not give it a try?
Why choose stocks instead of other options?
There are several other options, such as bonds, CDs, fixed-income or money market instruments. Then why stock? The reason is that they provide the highest potential returns that savvy investors invest in stocks. You can find no other type of investment that tends to perform better over the long term.
Here are other valid reasons:
Grow your Money
The stock market investments give you the chance to grow your money. The individual stock’s prices rise and fall daily. However, investments in stable companies that can grow usually make profits for investors. Similarly, investing in many different stocks will help build your wealth by leveraging growth in various sectors of the economy. That means you can earn a profit even if some of your stocks lose value.
Investment is Easy Now
These days investing in the stock market has become easy, extremely fast and hassle-free. With convenience and knowledge at your fingertips, the investment option which you thought is tough, is now within your grasp. Complete your KYC and identity authentication within a few minutes, from the comfort of your homes with the advent of digital platforms. There are a lot of resources to learn from to avoid the nuances of investing.
Power of Compounding
In any investment, the role of compounding is huge as it multiplies your wealth. In the stock market, you will reap good results if you let your investments stay for an extended period and let the interests compounded. It is one of the best benefits of investing in stocks and also one of the main reasons that you should consider investing now if you have not done it yet.
Inflation is a hurdle when it comes to wealth creation. In the long run, the only way to grow rich is by choosing ways that beat inflation or keep pace with it, at least. For example, an investment gets you 3-4% returns every year, but the inflation rate itself is 3.5% or so. That means it can get you Rs 104 after returns investing Rs 100. However, due to 3.5% inflation, the value of money reduces to just Rs 100.5 approximately that you can afford.
When the inflation rate is higher, the returns you earn from your investment will either cancel out or be minimal. Therefore, if your returns are not higher than the inflation rate, the returns may be effectively negative. But, stock investments can fetch you high returns over a long period. If done intelligently, stock investment returns can bring you double-digit inflation returns and help reach the desirable corpus in a relatively shorter time frame.
Earn from Dividends
There are individual companies or dividend stocks that offer dividends at regular intervals. Depending on the stock you buy, it could be ranging from 1% up to 10% and beyond the total money you invest every year. The companies distribute the profit among its investors through dividends. By investing in dividend stocks at a point of time can help you regularly earn from these.
Better Value than Fixed Returns
Traditional products like fixed or recurring deposits are safe but also give fixed returns for the investment tenure. In the stock market, you can get better value for your money. As stocks are aligned with the markets, in good times, you can earn double-digit returns as well. Investments into stocks besides other types of investments such as savings, fixed-income securities, bonds, money market funds, real estate can help you reach your goals faster even when the investment amount is the same. It, therefore, gives you scope to diversify your investment portfolio as well as enjoy better opportunities.
The Beneficial Long Term Investment
Take an example. Bajaj Finance, a non-banking finance company, gave 23,000% returns in its stock between December 2009 and December 2019. Of course, not all stock investments will turn your investments from lakhs to crores, but it is undoubtedly a great tool to multiply your money to the best extent possible, provided you hold it for an extended period. Your long term goals like retirement can be easily fulfilled.
Yes, there are downsides too. Stocks are perhaps the most volatile investments, and the value of stocks can drop in the short term. Also, it’s either bad luck if you consistently pick stocks that decline in value or bad timing, and those can also sink your returns. But you can minimize this risk by taking a long-term investing approach and diversify your portfolio.
Your money can perform harder for you in stock markets than in any other investment in the long run. Here, educating yourself and using knowledge is vital. Do a little bit of research into yourself; understand how much risk you can afford, what kind of an investor you are, and the type of stocks available in the market that suits you more. Take help from your advisor. Invest early and intelligently; your money can grow amazingly!
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(About Author: Arindom is a professional writer, editor, blogger and a member of the International Association of Professional Writers and Editors, New York. A management postgraduate in finance with extensive industry exposure, he is associated with many reputed global online magazines and publications as a regular contributor. He loves to help his readers writing highly informative and well-researched investment-related content to make informed decisions.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of organization)