Why You Should Invest in the Stock Market

Putting your money on a low interest savings account is not such a good idea especially if you have big financial goals such as buying a house, sending your kids to college or saving for retirement.  The only way to get more money is to make your money work for you by investing it.  Investments will generate more money for you in the future through interests and price appreciation.  In other words, you invest to create wealth.

By investing your money, you are making your money generate more cash for you in the future.

There are numerous ways on how to invest your money.  You can invest on bonds, funds or stocks, business, antiques, jewelries,luxury watches, artworks, real estate and other investment vehicles.  It all depends on your goals, preferences, time, capital and risk tolerance.

Although there are many investment instruments to choose from, the stock market is a good place for long-term growth to invest your hard earned money .  Here are the reasons why you should consider investing in stocks:

1.  Best Potential for Growth

Stock market investing is risky.  The stocks go down a lot.  However, there is a pattern that it has always stood the test of time.  After each major crisis, the value goes up a lot.  In other words, if you think long term, the cumulative gains always outpace the cumulative declines.

 

The stock market is still a good investment vehicle in the long run despite major economic and geopolitical crisis.

 

Although the most volatile, history has proven that stock market investing gave a high return in the long run.   Thus, the rewards definitely outweigh the risks.

 

Source: COL Financial

 

2.  There is More Than One Way to Invest

Depending on your financial goals and investment appetite, there is no single formula in stock investing. You can mix and match everything.  You can invest directly or indirectly through mutual funds depending on your time availability.  You can do simple investing or you can do trading if you have advance knowledge.  You can play it safe by investing only on blue chips companies or if you have a high risk tolerance, you can venture into small caps companies also.  Again, it all depends on you.  The key is to diversify.

3.  You don’t Need a Big Capital

Unlike other investment vehicles such as real estate, you don’t need to have a big capital to invest in the stock market.  In the Philippines, most stock brokers only require P5,000 (five thousand pesos) or roughly US$ 100 to open an account.  Some even require a lesser amount or none at all especially if you are a depositor in that specific bank.  There is also no required frequency nor amount on additional contribution.  It all depends on how much you can afford.

4.  Trade Anytime and Anywhere

As long as you have an internet connection and a smart phone, you can trade anytime during market hours and anywhere at your convenience.  Gone were the days wherein you need to spend so much time trying to contact your broker on the telephone in order to buy and sell stocks.  With technology, you can trade with one click of a button.  It only needs a minute or two of your time.

5.  Earn Passive Income

Earning from stocks through dividends and price appreciation is the best example of passive income.  Imagine yourself earning income even while on vacation with your loved ones.  That’s passive income and stock investing can do that for you.

As an investor of a company, you are entitled to receive a portion of a company’s income through dividends despite little or even no effort on your part.  Big companies have capable and qualified managers who take care of running the company.  

6. Advantage of Compound Interest

Compounding is the process of generating income from your capital’s reinvested earnings.  It means you are earning interest on your interest over a period of time.  Albert Einstein referred to it as “the greatest invention the world has ever produced”.

If for example you bought Apple shares worth US$10,000 in 1980, at 2017 that initial investment is now worth over US$ 2.7 million through compound interest.  

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s