When you are looking to build wealth, there is no alternative to stock market investing. The market offers the highest possible return on investment. The stock market has seen ups and downs over the years. This issue does not change that fact that investing is one of the most profitable ways to grow your money.
The stock market offers no guarantee that you will have a short-term positive return. But if you are able to commit to a long-term strategy, it’s likely that you will get the highest possible return. No other form of investment tends to perform better than stocks over the long term.
If you are still anxious about getting into the stock market, then these six compelling reasons can help ease your mind.
Greatest Potential for Growth
Stocks have consistently outperformed investment-grade bonds. Stocks also beat savings/current accounts and fixed deposits over the long term.
According to the S&P Stock Index, stocks returned an average annual return of 10.01%. Bonds and short-term investments lag far behind with 5.17% and 3.32% respectively. The return trend has never been in a straight line. These stats prove that stocks offer more growth potential over the long-run.
If you are saving for retirements or other long-term goals, then stocks are your best choice for wealth growth.
Stock Price Drops are Short Term Risks
You can very well ride out stock market drops by investing for more extended periods. Although there can be occasional market drops, they never last for too long. The return from stocks may appear painful at times. Based on historical records, the stock market will overcome down turns.
Worst declines can take as a decade to recover from. If you have long term investment goals, then market volatility should not be a cause of concern.
Wide Range of Options to Mitigate Risks
To reduce your risk factor, you should diversify your portfolio. Consider spreading out your investment in high, mid and low-risk stocks. The stock market offers you a wide range of options with varied risk factors and gaining potential. Conservative stocks may not give you the highest of yields, but they are far more reliable. Balanced stocks can provide you mid-range return while taking a little bit of risk. An aggressive growth stock can be risky but has the potential of earning you the highest ROI. Diversification can go a long way to protect you from the market volatility. An appropriate balance of investment in your portfolio is the best way forward to mitigate risks.
Stocks are designed to Beat Inflation
The stock market is immune to inflation. It has historically been able to keep up with or even exceed inflation rates.
According to J.P. Morgan Asset Management, the stock market has managed to maintain a CPI of 4.1% over the last 50 years. This rate of return is more than adequate to beat the rising inflation.
You Can Get Off the Mark with Low Investment
The stock market doesn’t force you to fork out thousands of dollars to set the ball rolling. The requirements for investing in the stock market are modest. You can set aside a few dollars every month to get the hang of things. As you get more comfortable investing, you can increase your investments.
You Can Choose the Perfect Timing at Your Convenience
There’s no good or bad time to invest in stocks. You may have heard that you should invest when the market is low. For a beginner, that hardly makes a difference. You can choose the best time to get going at your convenience. There’s no need to rush as you are not going to miss the bus. Instead, it makes sense to take your time and do your homework. Be realistic about your targeted returns and expectations.
There’s a wealth of knowledge available online to fine-tune your investment strategy. First, you need to figure out how to use the available information to your best advantage.
The stock market has the potential to provide you unmatched return on investment. The market may seem unforgiving at times. The prospect of lucrative gains can be irresistible. Long-term investment in stocks can subjugate inflation and occasional market drops. There is no denying the risk associated with stock investing. If you diversify your investment, you should get positive returns. If you want to get started in the stock market without putting up too much risk, there are brokerages that will allow you to buy fractional shares of stock and even give you free stock for signing up. Read about how Robinhood free stock works.
If you’re looking for tools to help you manage your personal finances or decide which stocks to invest in, check out this Personal Capital Review and Stock Rover Review.