Why should you invest in stock market?

There are only two ways to make money:

By working and/or by having your assets work for you. To invest is the prospect of not having to work your entire life!

By investing your money, you are getting your money to generate more money by earning interest on what you put away or by buying and selling assets that increase in value.

Whether you invest in stocks, bonds, mutual funds, options and futures, precious metals, real estate, your own small business, or any combination thereof, the objective is the same: to make investments that will generate more cash for you in the future.

Now the point is “Why should you Invest in Stock Market?”

• In present economy with increased investment in businesses and decreasing purchasing power of money it has became difficult to start business with an ease. Therefore the best option to become part of any business is stock market.

• By investing in stocks you become partner in that business. You get regular returns in form of dividends, bonus’s and share splits. Moreover your wealth will certainly increase in long run.

• The more time your money is invested, the more time it has to grow. And one of the best ways to give your money a chance to grow over the long term is by investing in stocks and stock mutual funds.

• Even though investing seems risky, not investing means taking risks, too, when you consider the long-term threat of inflation. If you don’t grow your money, you may not be able to afford things in the future. So, you invest to grow wealth and preserve purchasing power.

• On the downside, stocks tend to be the most volatile investments. This means that the value of stocks can drop in the short term. Bad luck or bad timing can easily sink your returns, but you can minimize this by taking a long-term investing approach. Now what I mean is a period of 10 to 15 years for long term approach.

• Financial markets are ocean of various financial instruments. Amongst which stocks and bonds are the most popular ones. Now stocks are of three kinds.

1. Large Caps-Low Risk Low Return
2. Mid Caps-Medium Risk Medium Return
3. Small Caps-High Risk High Return
4. Bonds-Low Return with very negligible risk.

• The next step is to do Asset Allocation. Asset allocation is how you divide your money among various investments. The way you mix investments determines the overall level of risk in the portfolio. With the right mix, you can control portfolio volatility to a certain extent. You also have some control over the level of returns. Higher-risk investments generally offer higher returns; lower risk equals lower returns.

• Making money in equities is not easy. It not only requires oodles of patience and discipline, but also a great deal of research and a sound understanding of the market, among others.

• If you can’t review your portfolio due to time constraint or lack of knowledge, then you should take the help of a good financial planner or someone who is capable of doing that. “If you can’t even do that, then stock investing is not for you. Better put your money in safe or less-risky instruments.”

• Don’t wait for the right time. Instead, start averaging into the stock market. That strategy involves investing a percentage of your income into the markets regularly.

• Avoid Sheep herds. Thus, if everybody around is investing in a particular stock, the tendency for potential investors is to do the same. But this strategy is bound to backfire in the long run.

• “Emotions are going to screw you up as an investor, or even a professional. Your emotions are going to mess you up and make you buy and sell at the wrong time.” Many investors have been losing money in stock markets due to their inability to control emotions, particularly fear and greed. In a bull market, the lure of quick wealth is difficult to resist. Greed augments when investors hear stories of fabulous returns being made in the stock market in a short period of time. “This leads them to speculate, buy shares of unknown companies or create heavy positions in the futures segment without really understanding the risks involved.”

So don’t wait....... just start investing.....

For further information you can visit my blog: www.investorbasics.in