Why Should You Invest in Stock?

Why Should You Invest in Stock?

Stocks are but one of many possible ways to invest your hard-earned money. Why choose stocks instead of other options, such as bonds, gold, or Amanah Saham? Quite simply, the reason that savvy investors invest in stocks is that they provide the highest potential returns. And over the long term, no other type of investment tends to perform better. Should be highlighted that investing  is different than trading in stock market.

There are the downside investing in stock because stocks tend to be the most volatile investments. This means that the value of stocks can drop in the short term. Sometimes stock prices may even fall for a protracted period. Bad luck or bad timing can easily sink your returns, but you can minimize this by taking a long-term investing approach. Hence, that is what we mean with investing.

There’s also no guarantee you will actually realize any sort of positive return. Actually, all of investment have no guarantee of positive return. What differ is the volatility and risk exposure of the investment.  If you have the misfortune of consistently picking stocks that decline in value, you can lose money, even over the long term!

Therefore, it is crucial to educate yourself and using the knowledge you gain with discipline so that you can make the risk acceptable relative to your expected reward. So here are some of the reasons why you should invest in stock:

  1. Best long-term investments. As studies have proved, time and again, that shares (or equities) are one of the best investment over time in the financial market place. They tend to outperform government bonds, corporate bonds, property and many other types of asset. With the power of compounding, you can reach your goals much faster than saving.
  2. Own Successful Companies. All of the wealthy people in this world are either owning a successful business or holding a piece of successful businesses’ equities. Owning something of profitable is good idea as it will providing you some income. As a owner you are entitle to some of that profits. As company prospers, so do its owner
  3. Everyone can invest in stock. You do not need to be rich to invest in stock. You can take a piece of real business by buying its share in stock market as low as RM20. However, as general guideline, appropriate mix of investments should be based on your time horizon, financial situation, and tolerance for risk.
  4. Share can flexible and liquid as it can be designed to provide investors with two types of return, annual income and long-term capital growth. It is just like buying a property to gain monthly rent, share can be bought to gain yearly dividend and capital appreciation. The different are share are more volatile, liquid and flexible than property.
  5. Share give you a lot Variety and option.  There are a lot of companies are listed in the stock market which you can pick and choose based on your goal and risk appetite. You have a rights to look at factors such as the type of company, its management and location, its past performance and growth plans, to assess whether it’s a good investment.
  6. Predictable form of investment. If you have a knowledge and skill, you could easily predict the direction of share price and projected your gain. Hence, it is crucial to know what you’re doing

However, it is important to say that you should always avoid having the herd mentality if you don’t want to lose your hard-earned money in stock markets. As The world’s greatest investor Warren Buffett said,

“Be fearful when others are greedy, and be greedy when others are fearful! “

References:

  1. www.morningstar.com
  2. London stock exchange
  3. Bursa Malaysia

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