What
are the Benefits of Investing in Stocks?
Many of my
friends have invested in the stock market over the years, some have done well
while
thers have been less fortunate, is it a good idea to put my extra cash
in stock, why invest in stock?
Investing in the stock market has traditionally
been how the affluent hedge inflation risks. The stock market has a history of
continuous growth over time which cancels out the effects of the diminishing
value of currency, which is why many people choose to invest in stock.
Why invest in stock? Besides the inflation hedge
aspect, your money can grow substantially if the stock you buy is of a highly
successful company. Many present day billionaires and millionaires have begun
their fortunes by risking their money on the stock of a new company.
Conservative investors can also enjoy the benefits
of stock ownership without incurring too much risk by investing in stocks such
as electrical utilities or food producers. Also, many companies have bonds
which can be converted into stock called convertible debentures, which could
also be an appropriate investment for conservative investors.
The advantage of investing in stock versus other
investments, besides the prospect of capital appreciation, has to do with the
wide variety of businesses which have stock publicly traded. You can have a
diversified stock portfolio with selected stocks which can outperform the
general market if you select your stocks in industries which are in the process
of rapid growth.
In addition, many of the more established stocks
pay out a dividend quarterly, which can also provide the stockholder with an
income. If you plan to invest in stock, it would be prudent to do some
preliminary research on several stocks in the same industry you plan to invest
in before buying. Investing in stocks can be risky depending on the company, so
be aware of this before making a decision on what stock to buy.