You should invest in stocks. Seasoned stock market investors will tell you this. However, it is still important to highlight the fact that stocks have disadvantages and several notable risks. It is also a high-return investment that comes with higher risks compared to bonds and the money market. Investing in stocks still has its advantages. You should consider doing so.
5 Reasons Why You Should Invest in Stocks
Remember that the advantages of investing in stocks center on its capacity to generate wealth through the power of time and the exponential benefits of compounding. These advantages can be translated further to more straightforward reasons. Take note of the following:
1. Protect Your Wealth From Inflation
One of the major reasons why you should invest in stocks is that inflation is a fact of life in most cases. You can lose your purchasing power in the future if you let your money sleep in bank accounts and other low-return investment options such as bonds. Stock markets and pooled index equity funds have historically demonstrated their capabilities to both outpace inflation and provide higher returns in the long term.
2. Diversify and Balance Your Portfolio
The ideal investment portfolio is composed of different assets, securities, and other investment options. Stocks should be part of your portfolio if you are looking for medium-term to long-term growth. Their potential for providing higher returns will enable you to achieve substantial gains while managing your exposure to higher risks or potential losses by remaining invested in moderate and low-risk investment options.
3. Choose From an Array of Options
Another reason to invest in stocks is the availability of different stocks or companies that you can invest in. Note that there are different types of stocks. There are also different industries and sectors to choose from. Each can help you meet your investment goals and objectives. Investing in stocks allow can either help you diversify your investment portfolio further or benefit from the different phases of the economic business cycle.
4. Prepare For Future Big-Ticket Expenses
Remember that inflation negatively affects your purchasing power. Your cash today will not be worth the same in the future. You need to find an investment option that provides higher returns that will give you enough purchasing power to fund bigger expenses. Some notable examples of these future big-ticket expenses include achieving and maintaining comfortable retirement, sending your children to college, and starting your own business, among others.
5. Benefit From the Companies You Support
You can turn your passion for certain companies or brands into profits. For example, if you are a loyal customer of Apple, perhaps, aside from buying the most-recent iPhone or MacBook, you can also be a part owner by purchasing and owning AAPL stocks. The same is true for other brands such as your favorite fast-food chain and apparel manufacturer. Investing in these companies means benefitting from their success.