A lot of people think that investing in the stock market is risky. And it is – if you don’t know what you are doing. Because the truth is anything is risky if you don’t know what you are doing. With the worldwide recession going on today the stock market is seen as an even greater risk. Stock prices have been fluctuating like crazy. Companies are going bankrupt left and right. Why put your money at risk? The bank is safer, right? Wrong. Despite the craziness that has been going for quite some time now, the stock market is still a very good investment vehicle. Here are 5 reasons why you should invest in the stock market.
The stock market has good interest rates. I have nothing against banks – except their low-interest rates. You only get about 2% tops if you put your money in the bank. Time deposit gives you around 6 or 7%. The stock market, on the other hand, has an average interest rate of 18% per annum. Now that’s a lot better than 6 or 7%, don’t you think?
Leverage. When you invest in the stock market you get to make use of the most powerful form of leverage in the world – compounded interest. Compounded interest is when the interest is added to the principal amount and it starts earning as well. In a way, your money starts earning you more money.
Diversification. The stock market allows you to diversify. A good investor knows better than to put all his eggs in one basket. You never know what’s going to happen. So play safe and invest in several good companies. Of course, don’t diversify too much or you won’t be able to enjoy good returns. Invest in good stable companies and you can be sure that you will end up with a comfortable nest egg to retire on.
You can grow your wealth slowly but surely. Investing is not like winning the lottery. It’s a process that takes time and effort. The revenue your get from your stock investments can increase over time. The market may fluctuate and there may be times when you hit negative, but as long as the companies you have invested in are good they’ll rise back up.
When it comes to investing in the stock market, time is your greatest ally. The earlier you start, the better. However, you should also watch the companies you invest in. The current market conditions make investing in the stock market a bit risky – especially if you don’t know what you are doing. So the best thing to do is to study the market so you can take calculated risks.
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