The stock market is full of ups and downs and sometimes even the best analysts fail to predict its trends correctly. However, despite this risk, a lot of people continue to invest in the stock market and more investors are added every day. You may not understand this logic but investing in the stock market has been highly profitable to people despite the risk. In the stock market, the risk is directly proportional to the reward and this prompts people to take higher risks. In this section, we bring you a host of reasons to invest in the stock market.
Reasons to invest in stock markets
Check out the reason why you must invest in the stock market:
At any given point of time, you will have money in your bank account that is sitting idle. You can use this money that is not in use to make more money and this is known as making your money work for you. This allows you to turn your existing money into a financial asset that will earn you money. Based on how you invest and where you invest, you can get handsome returns through the stock market. The best part is that you can invest based on your risk appetite so that you get good returns for a designated amount of risk.
Usually, your income is only what you earn as a salary. You can change this by earning extra money on the side using the stock market. The stock market will allow you to augment your income further by earning more money. You can use the remainder of your salary after removing current expenses to earn you money through the stock market. You can invest in a diversified portfolio in order to get different volumes of returns from different stock options.
A lot of your long-term goals like buying a house or owning a car cannot be fulfilled by just your salary. This is because the value of your salary will slowly erode due to inflation. Hence planning and saving for long term goals can become really difficult. You can circumvent this problem by investing in the stock market to see a good appreciation in your investments. The stock market has for long helped middle-class families achieve their long-term financial goals. With a sound long-term financial goal in mind, you can tweak your portfolio to get maximum returns for a defined amount of risk.
You may be young and hard-working right now, but you won’t be forever. There will come a time when you will grow old and will have to stop working and retire. You can’t wait for the last day to worry about your retirement since it is inevitable. You should start planning immediately for your retirement. You can opt for investing in a sound retirement plan or you can tweak your own portfolio to yield enough returns for your retirement. Without investing, it will be almost impossible to reach your long-term retirement goals. You should start actively building a portfolio for your retirement immediately.
No matter which country you live in, you may want to invest in your country’s growth story. This not just out of patriotism but also because of the fact that you can see the development happening around you. Investing in the growth story of your country is a good idea since you will be familiar with the geopolitical scenario of your own country. By investing in your own country, you play your part in your country’s development. In fact, even governments invite people to invest in their countries by issuing bonds and floating other financial instruments.
a. Investing in other countries
You may be living in a particular country but you may wish to invest in another country. If your own country is witnessing an economic slowdown then you may wish to invest in some emerging economies. It’s important to keep in mind that you can explore opportunities in other countries but there is risk involved if you don’t know their geopolitical scenario. If you are living in a foreign country, then you can invest back in your home country as well. There are also many targeted mutual funds which invest money in only one specific country. You can opt for such funds to further your portfolio’s investments.
The stock market provides you with a greater level of financial stability. This is because you can purchase shares and bonds and hold them. They will eventually appreciate in value and give you good returns. Even if you lose your job or your income wavers, you can still sell these assets and use the money. Keeping money invested in the stock market provides you with a buffer which you can use on a later date. You can even keep the money invested in the stock market to further your long-term goals.
Inflation is the phenomenon where the prices of all commodities rise slowly but surely. For someone who is earning this is not much of an issue as the salary also rises in proportion to the inflation. But for someone who is retired, this will be an issue as they don’t have a source of new income. The purchasing power of their existing money diminishes as the prices rise but the existing money doesn’t. Investing in the stock market can help you beat inflation. You can set up a portfolio that gives you a greater rate of return than the inflation rate which will help you beat the rising prices. Investing in the stock market can help you remain in the pink of financial health even after retirement.
The stock market is a complicated mix of financial instruments and there is no denying that. However, it has become imperative to invest in the stock market considering the rising cost of commodities. The longer you invest, the more returns you will get. Now that you are aware of the advantages of investing the stock market, it is time you start investing too.