The stock market has made some individuals very happy with the generous returns they have had with their investment choices. However, stock markets fluctuate depending on the market situation and this can be a risk to an investor.
What are the benefits of investing in stocks?
- They take advantage of the state of the economy.
The more the economy grows the more the corporate earns, jobs created, income generated and sales made. This pushes up the demand for consumer products thus making companies economically stronger. The strength of the shares depends on the strength of the issuing company; a company that is doing well in the economy will have stable stocks thus a good place to put your money.
- Stocks are easy to buy
Once you set up an account you can easily buy stocks in minutes. You can do it through a financial planner, broker or online. Some even let you buy them for free. Make sure you do your research before making a final decision on what to buy.
- Stocks are easy to sell
The stock market makes it possible for you to sell your stocks at any time. However, you may end up making a loss if you sell very quickly; you need to watch out for this.
- You gain ownership in the company.
When you buy shares in a company you become a minority shareholder meaning that you can make some decisions, for example, vote on business decisions and leadership changes. If you no longer want to be a part of the company, all you need to do is sell your shares and exit.
Disadvantages of stocks
- You can lose everything
It is not uncommon to hear of stock prices plummeting and people panic selling. If you sell you lose your initial investment. Avoid panic selling if you can, ride the lows and only sell when the market stabilizes.
- You are last to get paid.
If a company becomes bankrupt, you will be the last people to get back your money. Majority shareholders and creditors will have their accounts settled before you get your money. It is therefore important that you do not put on all your investments in one portfolio; diversify as much as you possibly can.
- It requires time.
In as much as it is easy to set up an account and to buy the stocks, it also requires that you take time to research what you are doing. You also need to constantly monitor the stock market so that you are on top of everything that is happening.
- Yes, it can give you stress-related illnesses.
Some individuals buy high and sell low out especially when the markets fluctuate. If you are constantly monitoring the stock market, then do not focus too much on the price fluctuations. We are not saying that you should ignore them; just don’t focus on them too much because it could lead to stress related illnesses, especially if the market is not doing well. If you do your research well then you know what to watch out for in as far as investing in stocks is concerned. Stocks are a good savings option that allows you to diversify your portfolio.