Benefits of Investing in Stocks

Benefits of Investing in Stocks

Benefits of Investing in Stocks

Benefits of Investing in Stocks

Despite its presence in the news, the stock market is just one of many potential places to invest your money. Investing in stock is often risky. That attracts attention to the tremendous gains and losses of investors. If you know how to manage the risks, you can secure your financial position and earn money.

You have a lot of options when it comes to your money. You could buy a game, you could renovate your house or you could take a trip around the world. But, if you are a bit more practical, your money can work for you. That means you can invest it in the stock market.

Many people have invested in the stock market over the years. Some have done well while others have been less fortunate. So, is it a good idea to put your extra cash in stock? Why should you invest in stock? 

Well, in the first place there is the inflation hedge aspect. The money you invested in stocks can grow extensively if the stock you buy is of a very successful company.

Many present-day billionaires have begun their wealth by investing their money on the stock of a new company.

The benefit of investing in stock can be magnificent. You can build a diversified stock portfolio with picked stocks which can beat the market. Of course, if you pick your stocks in businesses which have rapid growth.

But generally speaking, what are the benefits of investing in stocks?

We have to remind you, historically, the stock market has performed large returns to investors over time. But, it is also the truth, stock markets also went down. Over time, the stocks give investors the possibility for both profits and losses. Equally for risk and return. 

One of the main benefits of investing in the stock market is the chance to grow your money. Over time, the stock market performs a rise in value. Yes, the prices of individual stocks rise and fall daily. But, investments in solid companies that are able to grow, tend to make profits for investors. Moreover, investing in many different stocks will boost your wealth by leveraging growth in different areas of the economy. It will bring you a profit even if some of your individual stocks lose value.

Investing in the stock market provides many benefits to individual investors.

Owning stocks means to take advantage of a growing economy. 

How does it come?

That is a kind of chain of good fortune. Everything is connected and logical. 

When the economy grows, the corporate earnings rise. Well, you know, financial growth creates jobs. That creates income, which creates sales. The bigger the paycheck, the greater the hike to consumer demand. And it drives more profits into companies’ accounts. That is known as the phases of the business cycle.

Further, stocks are the best way to avoid inflation. 

Everything is math.

Taking it historically, stocks have averaged an annualized return of 10%. Does it sound much better than the average annualized inflation rate of 3.2%? It also means that you must keep them for a long time period. That way, you can be calm even if the value temporarily drops. Let’s do some homework.

Compare stocks, inflation, and the gold price in history. 

Let’s see Disney’s stocks history.

Disney company stock
Disney’s stocks history

 

What can you see? The stock price rose from year to year, mostly.

Now, take a look at the chart of US inflation over a period of 10 years.

US inflation rate
US inflation

WOW, what an electrocardiogram!

And in order to compare it better, here is a chart of gold price per gram.

Gold prices in USD
gold price

 

So, let us know what is a better choice, holding stocks or gold or money on your savings account when inflation comes?

The stock is easy to buy. You can purchase them through a broker or online. Once you’ve set up an account, you can buy stocks in minutes. There are online brokers out there that even let you buy and sell stocks for free.

Quiz yourself about the benefits of stock investing in the following quiz:

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