Stocks are commonly known as “shares” gives individual proportionate ownership in the issuing corporation. A lot of corporation are selling stocks for them to raise funds to run their businesses. While investors buy stocks that they think will have a higher value in the future.
In this way, they can grow their money and exceed inflation over time. Here’s a list of pros and cons of stock market investment to help you decide if you want to try the world of stocks.
PROs
- The stock market is vital for the US economic system to operate. US companies can expand their operations and earn more funds to improve their financial viability.
- People can make money if they bought some stocks. If the price of the stock goes up, they can sell it for more than what they paid for.
- Other individuals can earn money through dividends. Most stocks pay dividends quarterly.
Stocks have potentially higher returns compared with different types of investments over the long term. - It is also effortless to sell stocks. The stock market allows you to sell your stocks anytime you want or need it. Your shares can turn into cash quickly and with low transaction cost.
- It is easy to buy stocks. People can purchase their shares of companies from brokers, financial planners, or online. If you have set up an account, you can easily buy stocks in just a few minutes.
- There are also lots of opportunities. The stock market is massive. There are lots of opportunities since there are lots of companies to invest in.
CONs
- There is no guaranteed return of investment.
- Stock prices can rise and fall dramatically. You could lose your entire investment. If the company that you chose is not doing well, investors will sell their stocks. This might lead to a decrease value or amount of shares. If you plan to sell your stocks, you might get a smaller amount from what you have paid for.
- Stockholders are paid last if the company goes broke. Most of the time, the preferred stockholders and bondholders get paid first. This scenario happens only if a company goes bankrupt.
- A lot of time is needed. If you want to buy your stocks, it is important that you research each company. In this way, you will know and find out profitable companies. Monitoring the stock market is also an excellent way to be updated.
- You compete against professionals. Some people are very knowledgeable when it comes to stocks. Institutional investors and professional traders put a lot of time and effort to know about the stock market. After knowing the pros and cons of stock market investment, these professionals can help you choose where to invest. They have all the data and tools that can help them be successful in this field of work.
- Stock prices rise and fall at any time of the day. There will be a tendency that some individuals will be greedy so they will buy high. Also, some people may also be afraid or scared to lose some money so they will sell low. Emotions can be a big part of their decision making.
- Long recovery. Moreover, if you lose a significant amount of money in the stock market, it might take a long time to regain your original investment amount.
Investment is the right way for a person to use his/her money. However, each investment has its risks and rewards. It is still best to check which is suitable for you and do some researches which can help you decide what works for you and your money.
