The Stock Market: 8 Unique Reasons Why You Should Invest in Stock

Over the years, investing in the stock market has proven to be one of the best long-term investments. Moreover, in the past few decades, many that invested heavily in the share market made much money. As a result, there has been much attraction for young investors to invest in the share market. Here are 8 unique reasons why you should invest in the stock market.

Straightforward and Flexible

Investing in the stock market is very straightforward. You only need to acquire the knowledge, instill the discipline to remain in the game for long, and the ability to research more to identify the best companies (the ‘Amazons’ of tomorrow) and invest in them. After that, you’ll need to open a trading account and start investing.

Growth

“The most powerful force in the universe is compound interest”- Albert Einstein

You can easily grow your wealth by investing in the stock market through compounding interest. Here, you reinvest your profits, and in the long run, you can potentially make more money. Therefore, you can start small and grow big with time. But, before you even decide to take that direction, it’s best you first put your personal finance into consideration and explore all the best options available. If you lack hands-on experience in the stock market, you’ll need first to conduct in-depth research to enhance your knowledge and skills.  

Ownership of a Company

Investing in the stock market makes you a minority owner in various companies you invest with. The moment you purchase shares of a company, you own a stake in their business. Depending on the number of shares owned, you will receive some privileges for being a shareholder. For instance, the right to vote and participate in decision-making. However, the moment you sell your shares, you cease ownership.

Potential High Returns

There are potentially high returns investing in the stock market. When you purchase shares of solid firms and hold them for a longer period, you can make some good money for yourself. Then, again, with the power of compounding, you can accumulate your wealth in the long run for your retirement and other life goals.

Diversification

Investing in the stock market allows for diversification. For example, you can invest in shares of companies in different industries, such as IT, healthcare, logistics, and E-commerce, among others. You can invest in stocks of small, mid, and large-cap firms. Also, you can choose to invest in different assets, such as REITs, Indices, among others. Diversification helps in mitigating risks that are involved in investments. It helps balance your portfolio such that in case some returns go down, others can go up. However, over-diversification is discouraged since it will not add any real value to your investment.

Passive Income

Investors in the stock market can earn passive income regularly in the form of dividends. Dividends are payable every year, depending on the number of shares an investor owns. There are various types of dividends, for example, cash dividends, preferred dividends, special dividends, and dividend reinvestment programs (DRIPs). However, it’s important to note that not all stocks pay dividends. Thus, as an investor, you’ll need to research stocks that pay dividends and invest in them.

Protection from Inflation

Source: Epic Capital Wealth Management

Inflation is increasing rapidly across the globe. Although investing in the stock market permits you to earn money, the equities have historically been known for keeping up with inflation. Therefore, when investing in the stock market, ensure you settle for assets that beat inflation, for example, S&P 500, REITs, and Aggregate Bond Index, among others. In addition, ensure you’re well versed with the basics of stock trading before investing in the share market.

 Tax Advantage

Capital gains and dividend income are lowly taxed compared to interest income from bonds and employment income. Therefore, this makes investing in the share market much favorable compared to other investments.

Conclusion

Investing in the stock market is an exciting venture, especially for those that want to keep updated with the current global trends. However, as much as there are potentially high returns investing in the share market, it’s vital to know that it entails some risks. Therefore, you need to have solid knowledge before you invest in the stock market.

Image Credit: Angel Broking