Investing in stocks is unquestionably a good idea because it is an excellent way to build wealth. Stocks are a good long-term investment option for investors who are thinking long-term. Several investors, both novice and experienced, have made significant profits by planning and investing in stocks over the years. However, there are investors whose success formula did not work at all, causing everyone to think twice about entering the stock market and investing in stocks.
When an investor makes the right decisions, he or she has a better chance of profiting from those investments. After all, the stock market is notoriously volatile. However, investing in stocks has several significant advantages over other types of investments. There are many advantages of investing in the stock market and some of them are as follows:
- Profit:
The most important aspect of investing directly in markets is the market’s ability to deliver the kind of returns that it does. According to historical data, stock markets have always stood the test of time, rising in value over time, even though individual stock prices fluctuate on a daily basis. Investing in companies that have a consistent growth pattern and report higher profits every quarter, or in sectors that contribute to the country’s economic growth, will result in steadily increasing your wealth and increasing the value of your investment over time.
- Protection against Inflation:
The primary goal of investments is to secure our future, but we must monitor inflation on a regular basis. If the rate of return on investments and the rate of inflation are both similar, our gains will be nil. The rate of return on investments should ideally be higher than the rate of inflation. Stock markets or benchmark indices (Nifty and Sensex in India) have always outperformed inflation. For example, if inflation is around 3-4 percent, then markets have seen yearly gains of around 10%.
- Flexibility:
As a new investor, you can begin with small investments in the market by purchasing small-cap or mid-cap stocks or large-cap stocks in smaller increments. It is not mandatory to have a large initial investment. Another advantage of onling trading in stocks directly is that you can buy at your leisure; there is no requirement to invest a certain amount every month.
- Ownership stake in companies:
Purchasing a stock entails acquiring an ownership stake in a specific company. It will give you a sense of ownership in the company you enjoy working for. It means that you, as a shareholder, have a say in how a company makes decisions, and you have the ability to vote on those decisions. There have been several instances where shareholders have prevented company management from making irrational decisions that are harmful to their interests. You will receive the company’s annual report in order to learn about the company’s overall growth.
- Income from dividend:
A dividend is a form of additional income for investors that is paid by most companies on an annual basis. Dividend payments are made even if the stock has lost value, and they represent income in addition to any profits made from selling the stock in the future. Dividend income can be used to fund retirement or to pay for additional investments as your investment portfolio grows over time.
- Liquidity:
Stocks are classified as liquid assets, which are assets that can be easily converted to cash and have a large number of buyers at any given time. The same cannot be said for all assets; some assets, such as real estate, are difficult to sell. It could take months to see a return on your investment in real estate. However, it is much simpler in the case of stocks. The average daily volume of transactions on the NSE and BSE is high, implying that a single stock has multiple buyers and sellers.
- Contribution to the Indian economy:
The stock market is always a factor in a thriving economy, responding to all economic growth indicators such as GDP, inflation, corporate earnings, and so on. Stock market investors can directly benefit from a thriving economy, and the value of their investment grows in proportion to economic growth. When an economy is growing, corporate earnings rise, and as a result, the average income of an individual rises. This, in turn, influences consumer demand, resulting in an increase in sales. As a result, the value of your investment in a particular company rises, i.e. the share price rises.
You should actively consider investing in stock markets and diversifying your financial portfolio in order to stay ahead of inflation. Aside from that, you will have the freedom to select which companies to invest in, as well as a much-needed liquidity cushion. Clicqndtrade acts as a single window platform to plan and execute your investment goals.