You’ve probably heard of people who have enjoyed high returns after investing in the stock market. It is one investment option that offers great rewards. This kind of investment also has its risks. Stock investing can be daunting if you have no idea what you are doing. Is stock investing worth it? Yes, it is. You only need to understand how everything works before investing in the stock market.
What is Stock Investing?
It is a form of investment that involves buying company shares. What this means is that you will have a small shareholding in a specific company. This is usually done with the speculation that the shares of a particular company will go up after a specific period.
An increase in stock value is vital because they can be sold for a profit, and that is where you will start enjoying the rewards. A stock is a type of security that represents an ownership share in a specific company. You should understand how everything works to have an easy time in the stock market. Also, many companies pay dividends which is a great way to get passive income.
Investing in the Stock Market
Before you start, you need to look for a good stockbroker. This should be one who is licensed by the relevant regulators within your region. The different types of brokers you will come across include online or discount brokers, full-service brokers, discount brokers with assistance, and money managers. You are then required to register a stock account to begin trading. The first thing you should do is to determine the kind of brokerage account you need.
Traditional brokerage and cash accounts are common types to choose from. A traditional brokerage account is the best because you will enjoy free withdrawals anytime you want. You will only be required to pay tax on your profits and dividends.
The other thing you should consider is the cost and incentives that come with a specific brokerage account. Compare the different types around to choose one with the best incentives. You should also look at the various services offered by a particular broker before opening an account with them. This may vary in different between different brokers, so you should compare to choose the one with the best service.
You should then fill all the details needed when registering your account before funding it. Researching investments is the final step before you start trading. Choosing the wrong broker can cost your dearly. During this process, you should take your time to choose one that will guarantee you a smooth time in stock investment.
Benefits of Investing in Stocks
Is it worth investing in stocks? Stock trading is a worthy investment. There are several benefits you will enjoy when you opt for this kind of venture. They include:
- Higher Returns
Stocks have higher returns compared to bonds and cash deposits. They tend to go up and down in value at one moment or the other. This value is usually high, and you are guaranteed higher returns. The share price also increases with time, which is good for your portfolio.
- Grow With the Economy
It is another benefit you will enjoy when you invest in stocks. You can take advantage of your growing economy. Economy growth means there is an increase in corporate income. This is because there will be an increase in the number of jobs created, which also triggers sales. Consumer demand will rise, and more companies will generate lots of revenue as a result. This is likely to grow their value, and you stand to benefit if you have invested in the stocks of a specific company.
- Perfect Way to Beat Inflation
A high number of investments have been viewed as a shield to inflation. Perfect examples include real estate, commodities, and even stocks. This is because a rise in prices means most companies are going to make lots of money from the sales they make.
Selling products at a higher price is one of the things that can grow a company’s value. This mostly applies to companies selling products that have a high demand. However, there is no direct link, so the protection is not that guaranteed.
- Easy Purchase
Buying company shares in the stock market is a simple task. There are several options you can try out. Brokers, online platforms, and financial planners are some of the popular options you can try out. All you have to do is create an account and start buying stocks. You will come across several online platforms that let you buy and sell shares without paying a commission fee.
- Easy to Sell
Just like buying, you will also have a smooth time selling your stock in this type of market. You can easily liquefy your shares or turn them into cash without paying a lot of money in transaction costs. It is the best option if you need your cash instantly. Prices are usually unpredictable, and your risk of making losses is generally higher. Selling stocks whenever you need is a better option you will enjoy in stock trading.
- Different Money-Making Options
There are two ways you can make money in stock investment. One of them is by waiting for the share value of a specific company to increase. Most people will buy stocks at a lower cost to sell them at a higher rate. That is why they will invest in companies that have all the potential to grow. It is ideal for those who are into day trading and investors who buy and hold.
You can monitor the short-term trends or wait for the share value of a specific company to grow with time. You can also make money in stock trading through dividends. These are regular payments made to shareholders. You should understand that not all stocks pay dividends. A high number of companies that do so will do it quarterly.
There are also several disadvantages you are going to face when investing in stocks. You should understand that the chances of losing your investments are much higher if a specific company performs poorly. The best thing you can do before investing in stocks is researching the different companies to determine how profitable they can turn out in the future. You should always be prepared for ups and downs when you decide to take this type of investment.
Successful Stock Investors
Several people have made huge amounts of money from stock investing. A perfect example is Warren Buffett. With how much money did Warren Buffett start? Some people say that his net worth was $6,000 when he was 15 and his current net worth is around 71 billion USD which makes him 4th richest person in the world.
Carl Icahn started investing with $150,000 of his own money plus $400,000 investment made by his uncle. His current net worth is around 14 billion USD.
Peter Lynch is an investor who worked as a manager of the Magellan Fund at Fidelity Investments. Lynch had an average annual return of 29.2% and he was consistently outperforming S&P 500 index for many years. His current net worth is around $450 million. Not good as Buffett and Ichan but it’s still a huge amount of money.
The list of persons who have made a lot of money from stock investing is endless. Can you make money owning stocks? This question has been correctly answered by the three examples indicated. You can also become the next millionaire if you do everything right.
Investing in stocks is a great way to make money. Important things to do before you start investing is saving money, learning how to invest, choosing the right broker and researching different investments better. You can turn smaller amounts of money into millions if you do everything right in stock trading.