Why to Invest In Stock Market
A lot of people question, why to invest in stock market? However, the real question should be why not to!
Over the years the myth of the stock market is a gambling game has faded away. Now a lot of people
are drifting away from the traditional investment options like fixed deposits, real estate, gold, etc, and moving toward the stock market.
There are plenty of investment options available today from shares, mutual funds to PPF, FDs/RDs etc but the investment option which has provided the highest returns in the long term are Shares. But high returns come with high risk.
So, let us have a look at the reasons to invest in the stock market.
1. Minimize the Inflation Risk
Inflation is a common phenomenon in the economy and often affects the return of an individual. The stock market is said to keep pace with the inflation rate and beat it. If you pick the right stocks you can actually get great returns even when there is high inflation . The biggest advantage of share market investment is that it has the potential to generate inflation-beating returns within a short period of time as compared to other investment avenues like bank FDs, saving accounts etc.. The average return that the stock market can generate in a year is almost 10% which is far better than the average annual rate of inflation. 2.Ownership stake in the company
When you buy shares of a public listed company, no matter how small your share size is, it gives you proportionate control over the company. This ownership of shares will in turn grant you the voting rights and you will receive dividends, bonus, etc.
3. Grow with The Business Cycle
The economic cycle goes through variations and does not stay the same always. The changing economic cycles also affect the stock prices.
So whenever the economy is in the expansion phase or growing immensely, there are better opportunities for the company. This creates a direct impact on the stock prices as well.
So, if you figure out the stocks that are in sync with the expanding economic growth, you can get great returns in a long run.
4. Become a Trading Pro
If you want to keep up with the current global standards, it is best for you to consider investing in stocks. Once you join this industry, it will be easy for you to get along with trading. Not to forget, the future of investment is trading in stocks. So if you aren't aware of it, you won't be able to multiply your investment fast. People who have spent years in this industry are having a major moment right now.
5. Earn With Compound Interest
Understanding how stock market works helps you in understanding the way of making a profit from it.
No doubt! The stock market works wonders in giving great profits because of the idea of compounding attached to it. So if you invest in the right stocks, you can actually earn money in the share market and much more than any other investment option.
Let us understand this with the help of an example. Suppose you invested ₹1,00,000 in the first year and got a 10% yearly return on the same.
This means your amount is now, ₹1,10,000. So the return will now be calculated on the new principal amount which is ₹1,10,000. If you generate a 10% return in the second year as well, the amount will now be, ₹1,21,000.
So, in this way you get great returns from the stock market.
6. Earn From The Falling Market
Now you must have heard that the stock market can fall or go down anytime. Whereas this is partially true keeping in mind the volatility of the market, there is no need to fear the same.
The simple way of earning in the stock market is to buy a security at a lower price and then sell it for a higher price. But the stock market gives you a chance to earn even when the market is moving in the opposite direction.
This process is short-selling. Here you can sell the shares first at a higher price and when the market falls and the prices reduce, you can purchase it again. So here, the difference between the selling and buying price is your profit.
So, now as you can see that there are various reasons why you should start planning your stock market investments now. Let us now have a look at the ways in which you can invest your hard-earned money in the stock market.
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