Many people shy away from investing in the stock market because they think it’s too risky. However, there are many reasons why you should take the plunge and put your money into the stock market. Here are some of the top reasons why you should invest in the stock market right now, whether you’re just starting to save or you’ve been investing for years!
5 Reasons to Invest in the Stock Market
If you’re reading articles on personal finance, you know that investing in stocks is a popular option. But how do you know if it’s right for you? There are 5 reasons why an investment in stock could be beneficial to your financial plan. To learn more about these factors
Stocks are your vehicle to achieve long-term financial goals
If you’re investing to save for a house, pay for college or build your own business one day, stocks are often best. That’s because stocks can offer higher returns than other investments (like CDs or bonds) over time.
Plus, as companies grow and increase their profits, stockholders benefit financially through dividend payments and rising share prices. With stocks, you’re essentially betting on a company’s future growth—if it succeeds, so do you.
Investment risk can be low if you do your research and diversify
While there’s no such thing as a guaranteed investment, there are plenty of ways to diversify your portfolio and minimize risk. If you invest in a broadly diversified portfolio of individual stocks, mutual funds, or exchange-traded funds (ETFs), you can limit your risk. Of course, even if you lose money on some of these investments, others may rise in value and outweigh that loss.
If you don’t invest, you are limiting your investment returns
Some investors go with a set it and forget it approach to investing, which is understandable. It takes a lot of time and effort to research potential investment opportunities and determine how long you should hold onto them.
For some people, investing feels more like hard work than playing. But if you don’t take an active approach—if you put your money into CDs or other similar vehicles—you will likely end up with returns that are far below what others who take a more active role earn.
You can protect yourself against inflation
One of the biggest threats to our money is inflation, which happens when prices rise on basic goods like food and fuel. And over time, inflation can eat away at your savings and your income.
But investing in stocks helps protect against inflation by giving you a chance to profit from price increases in these real assets. As we saw in 2008, while some investments are no good in a recession, shares of companies actually did well during that downturn.
Stocks offer strong value over time
Stocks are a great investment because they help you get an ownership stake in something that is going to be around for a long time—namely, companies. Over time, companies will grow and pay dividends (if you own shares of that company).
If you plan to hold on to your stocks for more than a few years, there’s not much risk involved. While stocks can fluctuate dramatically in value over short periods of time, long-term stock investors tend to do quite well.