It is challenging, and it is risky, it is for the rich, and a lot of other excuses I have heard when it comes to learning to invest in the stock market.
Around the financial world, there is more ignorance and mythology than anything else- Nothing happens in the financial markets that do not occur in other sectors. Companies that need financing and are looking for investors. And these, who are looking for profitable and safe companies where to invest their savings.
It is the logic and common sense of the market- The fruit bowl on your street will make its showcase as attractive as possible so that you buy the fruit from him and not from the neighbour. You have to compare with other greengrocers and choose the best option for you. And sometimes, if you are not attentive, they will strain you some rotten apple.
Understand Share Market
Before investing in anything, you should be clear about your goals in life and what you want the money for.
What way of life would you like to have? Do you want to work for someone else or start your own business? What are your values? Do you buy a house or live for rent? Do you want to change your car every five years?
All these issues and many more will affect your economy, and therefore your life. That is why you have to be clear and not let yourself be carried away by others.
With all this clear, the task of where to invest and which investment strategy to choose will be much easier. That way you won’t miss out on so much financial noise.
Having said that, I want to give you the thirteen reasons why I think you should learn to invest in Share Market.
13 reasons why you should invest in the share market are:
1. Inflation: The Termite That Eats Your Savings
If you are someone who thinks that where your savings are best, it is under the mattress or in a sock, I am sorry to give you bad news.
They are robbing you in front of your face without you realizing it. Just like if you have it in a savings account or any financial product that does not exceed inflation.
But what is inflation?
It is popularly known how the price rise. But this is only the consequence of the exact cause. To understand, the little machine to print money.
Money, like any resource, is governed by supply and demand. If suddenly there is a good harvest of potatoes, the market is flooded with potatoes, and as a consequence, the price tends to drop. As if potatoes are scarce in the market, their price will tend to rise.
Well, money works precisely the same. If there is more money circulating, the currency is worthless and less. Your purchasing power decreases. You can buy fewer things with the same money. And so, governments say, we are more competitive. Because by devaluing the currency, everyone will want to invest in our country.
It is the perfect excuse to keep going into debt and make ourselves more miserable. How with the income extracted from taxes they cannot sustain so many bureaucratic, social expenses, aid, subsidies, etc. they have to get into debt.
They print money, cover the deficit and start over. But all that money has already entered the system and has impacted the real economy. Like ghost airports, pharaonic buildings, useless organisms and sports centres that nobody uses. To give an example of public waste.
Therefore, so that your money does not evaporate with the irresponsibility of the politicians, you must learn to invest it. At least to beat inflation. To maintain your purchasing power and be richer every day, not weaker.
2. Fiscally It Is More Favorable
Did you know that the Treasury taxes more on income from work than from savings? In other words, it retains workers and the self-employed more than investors.
And if you reinvest your earnings, buying more shares, the benefit is double. On the one hand, the magic of compound interest will make you a millionaire little by little, with its snowball effect. On the other hand, the Treasury will not scratch anything, because you never get to cash your earnings.
Therefore, you mustn’t need the money you invest. Don’t need it for an extended period.
3. Build Wealth And Live On Income
The investment strategy I’m talking about is called buy and hold (Buy & Hold). Buy shares in substantial companies that have always distributed dividends throughout their history.
The objective is that your assets grow and at the same time, generate passive income. And that tomorrow, when you retire or when you decide to collect them, you can live with this income and your assets continue to grow.
Unlike other investment strategies, which are based on accumulating capital and when it is time to retire, they consume it.
4. Stocks And Mutual Funds Of Shares Offer The Greatest Growth Potential
The Indians have consistently enjoyed higher returns in long – term bonds, despite the ups and downs of the market.
For example, we can analyze the value of Rs. 100 throughout the history of the stock market. During this time, stocks produced an annual return of almost 20%, bonds 6%, and short-term investments 4.3%, before inflation.
Of course, it was not a continuous straight line throughout the period, but this shows that stocks have historically offered more long-term growth potential. This is why investing in stocks, or mutual funds of stocks, is so essential when it comes to saving for retirement or other long-term goals.
5. Stocks Can Resist The Ups And Downs of The Market
It is understood. It makes sense to have more stocks, but if the dips in the market still make you nervous, remember this: Things may get tough at times, but if the stock market behaves the same way it has in the past for long periods, then you will have no problems.
Thinking about it this way can also help: Losses are not real unless you sell your investments. If you are tempted to sell your investments when they have lost value, remember that you are investing for the long term. So why sell when you’ve suffered some losses when you can just wait for the market to rise again?
Also, if you save regularly and continue to invest when markets fall (and the market demonstrates the kind of long-term growth it has historically had), you will be pursuing an ingenious strategy. When the market recovers, you may be in an even better position than before to enjoy growth.
6. You Don’t Have to Invest All Your Money In Stocks
We believe that an appropriate combination of investments should be based on your time horizon, your financial situation, and your risk tolerance.
But, as a general rule, long-term investors should diversify their portfolio and include stocks in it.
7. Investing in Shares Means Buying a Share in The Company
As you already know, going to work every morning and receiving a salary at the end of the month is not the only way to generate money and increase your wealth. You can be the owner of a business without even needing to go to work. This may seem like a dream; however, this option is closer than you think.
It is difficult for some people to go from being employees to owning their own business; Just thinking about it generates fear, doubt and indecision. But did you know that owning your business is just a matter of taking advantage of the opportunities that arise?
Investing in the Stock Market is a business opportunity and can be a win-win situation for both sides of the equation.
You have to be determined and maintain a firm desire to take charge of your financial decisions; It is essential for you to to understand that investing in the stock market offers higher returns as long as you learn to manage risk.
8. Everyone Can Invest
That everyone can be a successful investor is true, but it is also true that investing is not a game of chance; in fact, it is not about losing or winning or being more competitive, nor does the rule that says: “Who is right wins and who is not, loses.” It is about putting money to work to multiply it. Therefore three requirements must be met: knowledge, strategy and discipline.
9. No Investment Alternatives
One of the most compelling reasons to go for the stock market right now is the lack of options. Not surprisingly, traditional banking products only offer a few tenths as a reward for savings. On the other hand, it is not a good time for fixed income either since it has discounted a great part of its growth potential. In some cases, even without possibilities to improve their positions. As a consequence of this precise scenario, you will have no doubts to conclude that the best idea to make your savings profitable is represented by taking positions in the stock markets. At least during this year that you have ahead. Although this proposal can be formalized through various financial products, even from different investment strategies.
10. Build The Right Portfolio For Higher Profit
There is a famous saying – Do not put all eggs in the same basket. In investment, this formula fits perfectly. You should invest in shares of different companies according to the investment.
If you invest in the shares of companies from different sectors, then this portfolio can help protect you from risk. The reason for this is that if some stocks do not perform well in a given period, then companies in other sectors can provide excellent results.
Increasing the number of stocks to a certain extent helps in sharing the risk proportionally.
11. Invest In Cheap Shares For Your Dreams
Many stocks in the stock market are priced between Rs 50 and Rs 500. Many of these stocks are considered fundamentally strong. According to market experts, investors can buy these shares with a small amount every month. The amount invested should not affect your budget or savings as these investments are for the long term. If any of the stocks in which you have invested grow like Infosys or Reliance Industries, with the help of a small amount, you can become a millionaire.
12. There is No Other Option to Earn More And More
There is no more compelling reason to choose this equity market than the fact that it is the most profitable alternative available right now. The only risk you have is that a change in trend is generated in these months that will ruin your forecasts. No matter how little their stock indices rise, they will always be more competitive than other financial products. You don’t even need to have open positions every month. Not surprisingly, you can make them profitable in a few days, weeks or even months. If so, you will have covered your forecasts for the entire exercise.
In this sense, financial agents clearly hold the majority opinion that it is better to lean towards equities than fixed ones. It is worth taking a little more risk in the positions in exchange for improving the performance of your movements until the last month of the year. The average return of the stock market in the previous five years has approached levels of between 10% and 15%.
13. Benefits of Market Movements
By entering the market, you take an essential step in your life. The movements they register generate opportunities for you. In other words, if the Stock Market moves with a positive trend, it is almost a fact that they will be able to win.
If the market takes a profit rally, you are on your way to the goal. But, if the movements are downward, there will be possibilities of losses, but don’t be scared. Naturally, the Stock Market returns to positive territory. So find a brokerage house and get started.
Contact a financial advisor, and with their help, you can enjoy the benefits that the stock market offers you.
Risks in Share Market
- If one does not have sufficient analysis, whether due to ignorance or abandonment, there may be the possibility of investing at the wrong time, and maximizing losses instead of minimizing them.
- They are investments that require considerable time to see profits (especially if it is small capitals, where fixed costs absorb this concept), so the investment horizon is long term.
- Although the risk can be minimized, it will never be decreased by 100%, because the market risk cannot be mitigated
- Even though the stock market is regulated, there is a possibility that the legislature will enact laws that can benefit the development of our investments.
- While the money is in the capital market, the disposition will not be immediate to the flows. Therefore there is a risk that we have an emergency and not be able to use the streams instantly (called liquidity risk).
Regardless of age and when you intend to retire, everyone wants to enjoy retirement and pursue their hobbies without having to worry about money. This requires creating a diversified investment portfolio and allocating more space for stocks.
Beware of excessive conservatism. You have to get used to the ups and downs of the market and learn to deal with them. If you’re investing long-term and saving regularly, the economic downturn may work in your favour – you’ll be able to buy stocks and mutual funds cheaply. This is the advantage of long-term investment.