Many savers fed up with risible rates of return on their cash are being tempted to invest in stock markets instead. You can invest in stocks yourself by buying individual stocks or stock mutual funds, or get someone else to do it for you. Investing in stocks has its perks. It is important that you know about them so that you can learn to appreciate the opportunity. Let us look at what those benefits are:
Getting started is easy
Unlike most ventures, getting started investing in the stock market is really easy. It’s cheap too. After mastering the basics of investing in the stock market – which is what you will learn in this book – you will only need to save up a few dollars, open a brokerage account and start buying shares. Even a few hundred dollars will get you far, as long as you keep adding to that investment.
If you are a busy person who has always wanted to invest, you can’t imagine anything being better than this. You just do a little bit of research on good candidates to invest in, you put your money in them and then you just check on them for no more than 5 minutes every day. Very few businesses allow you to operate with that much ease and flexibility. Most businesses require massive capital, endless paperwork, rental costs, paying for manpower and a lot of other endless details that can make your head spin.
You stay ahead of inflation
Inflation is always a real problem when it comes to money. It is estimated that inflation eats away at the value of your money at an average of 4% every year. This is one of the reasons why being too conservative or risk averse when it comes to money is often a serious problem. If you choose to save instead of investing, I can guarantee that you will lose big time.
This means that even without sophisticated market knowledge, merely putting your money in stocks puts you in the driver’s seat when it comes to beating inflation. Arm yourself with a little bit of market skill and you will get returns that would even make a professional banker lose their sleep.
Liquidity is an important factor when it comes to investing, and this is one of the best reasons why you may choose to go into stocks. The reality is, there are many other good investment vehicles out there. Real estate is one good example. The problem with real estate is that it suffers from a lack of sufficient liquidity.
If you buy a piece of property today that ends up appreciating in value in the next five years, exiting that investment isn’t always an easy feat as one might imagine. Ready buyers are not always within reach. You may have to spend money on marketing so as to attract potential buyers.
If marketing isn’t your cup of tea, you may have to involve professional real estate brokers, who usually charge an awful lot for such services. Then comes the paperwork; closing such deals requires serious paperwork and you may even have to involve real estate attorneys to go over them. Such services come at a price.
The bottom-line is investing in real estate is a tedious and risky process. Even shopping for property requires meticulous research and prices aren’t usually transparent. The possibility of getting ripped off is always real.
Comparatively, stocks are much easier to deal with. There are so many participants in stocks, such that liquidity is always guaranteed at any given time. You could purchase a company’s stock in just a few seconds, and sell it after maybe an hour, or even just a few minutes. A ready market always exists.
Also, the clearing house is always required by law to guarantee the liquidity. There is no point in time - even in crazy bear markets-when you will find no buyer for your stock if you decide to sell.
You can profit in either direction
This is one of the biggest advantages of participating in capital markets such as stocks. You can make money whether the market falls or rises. Most people are familiar with buying something when the price is low and selling at a much higher price. In the world of speculation it is called going long, and is the most straightforward way to make money in a bull market – a market where prices are consistently rising.
What most people do not know is that you can also do the opposite – sell when prices are high and buy back when prices are low. It is called going short and is the perfect thing to do in a bear market – a market where prices are consistently going down.
This kind of flexibility allows you to take advantage of any economic situation. Like investing in a free UK business directory. You do not have to be loyal to one side. You can make money even when things are going bad for a company or the economy in general.
Most people who are not informed on matters concerning investments don’t have the slightest idea about this. And this is one of the reasons why most people become poor when economic storms hit. In reality, such events are always golden opportunities for you to cash in big.