Finance Care Guide Personal Finance Blog
Most people invest their money for long-term financial security. Typically there are two ways to invest your money. The first is money earns money. In other words, you invest into a company, such as buying stocks, and in return you earn dividends as a shareholder. The other way is to buy something that will ultimately increase in value. The stock market is one of the best ways to invest your money and while there is some risk, there is risk in any form of investment. Where there is risk, there is the potential for profit. The important thing is to manage your risk correctly. There are plenty of reasons to invest into the stock market. Below are some of those reasons.
- Stock Market Risk vs Other Risks
Losing money in the stock market is not any greater than losing money from other mechanisms. For example, many people do not save properly and end up running out of money well before retirement age or do not safe enough and run out during retirement. Investing in the stock market takes planning, thought, forecasting and money. The best way to mitigate your risks by investing in anything, especially the stock market is to have a diversified portfolio and honestly the stock market gives you your best option for that. You are given more option for growth and the potential for more profit by investing into the stock market if you do it right.
- Stocks Provide More Growth
Stocks have consistently provided more profit growth over the years. On average, stocks see about a 10% growth annually. While there are always ups and downs, generally speaking there is growth potential. Even if there is a bad year, typically speaking, the price will go back up. For long term support, your best option is a stock investment or multiple stock investments. Bonds do see growth, but at only half the growth.
- Stocks Go Up and Down
As stated above, the stock market does have a habit of going down at times. The economy does have an effect on the market and we can see a drop in the market prices; however, historically speaking if you hanging in there you will make your money back plus more if this happens. Remember stock investments are for the long term, do not be tempted to sell just because they are down for now. Always think long term. Short term ups and downs happy, do not let that make you nervous. Stock market investments are profitable because of this ability to rise over time. The market does recover and those who continually invest will be rewarded.
- Financial Flexibility
Investing into the stock market gives you financial flexibility because you can sell or buy shares of stock whenever you want. The best thing about it is that the shares are liquid. You can sell and get your cash back as quickly as you bought into a stock. Unlike other investments like real estate, you have the flexibility if needed.
- Options
Stock market investments mean that you have various types of investments to choose from such as stocks, bonds, mutual funds, etc. For example, stocks are typically more risky that other types of investments, but you are more likely to make faster potential earnings. However, there are different levels of risk depending on the stock itself; therefore, you have options in stocks as well. Conversely, a more conservative approach that will ensure a long-term profit is to invest in bonds. Although it may be minimal, it is still income. Bonds are less risky and provide a guarantee income over a long period of time. The stock market provides everyone a way to invest from those wanting to risk a little to those wanting to go all in. You can pick and choose based on your needs and wants.
There are several other reasons you might want to invest into the stock market, these are just a few of the top reasons that most individuals choose to do so. Portfolio management, research, diversity, and little investment money can go a long way.
