Investing in stocks can be pretty scary, especially if you don’t know what you are doing. But it needs to be said that even experts in this field will not be absolutely sure about their moves, especially in uncertain times. The world’s economy experienced one of these times in 2020, with the global pandemic of coronavirus, which devastated a plethora of industries.
The number of those who didn’t take a massive blow is pretty low. Since stocks are directly tied to the companies, who are again tied to their own respective industry, we can see what caused the massive decline last year. Even though the effects of the global crisis will be felt for a long time, the first wave has now passed, and we can look to a brighter future.
Humanity will just need to learn how to cope with these problems. Anyway, we can see that the decline of stock’s price has made a lot of people interested in investing in some of them. However, undergoing this journey cannot be done without understanding the basic concept.
Therefore, we would like to recommend a book that can provide you with an insight into the whole story. In case you are interested in checking it out, be sure to visit amakella.com. Now, we would like to talk about the advantages stocks have over alternative investments. Without wasting your time further, we will start with these now.
1. They Follow the Economy’s Growth
With every step economy makes towards growth, corporate earnings follow. Why is this happening? In the simplest way, we can describe this process is that the economic growth creates new job positions, which directly generates income and sales.
The bigger the salary, the greater boost to customer demand. All of these directly lead to generating more revenue in companies. To monitor this process in a more effective way, you will need to have a full understanding of the business cycle, which consists of expansion, contradiction, peak, and trough. It could be said that this is the greatest advantage of buying stocks.
2. Aggressive Growth Potential
As you know, there’s a wide array of different types of investments. However, almost none of them have the potential similar to stocks. Why’s that? Well, since their worth is increasing along with the economy, their potential is almost limitless. Naturally, these limitations are imposed by the strength of the country’s economy.
But, if we are talking about the world’s economy, you can understand why we’ve labeled their potential as limitless. You don’t need to take our word on this, you can monitor a couple of companies and how the worth of their stocks progresses over time. Thankfully, you will not have a hard time finding this information in this day and age.
3. Avoiding Inflation
When we take a look from a historical perspective, we can see that stocks averaged an annualized return of 10%. You will certainly agree that its average is way better than the annualized inflation rate. What does this mean exactly? It means that you will have more time to act when facing inflation.
Furthermore, you can retain control over stocks even when their value drops. Not only that, you will be able to hold the existing ones and buy new ones even when facing a crisis. Why’s it better than other investments? Simply said, you will have way more time to act and preserve as much as it is possible than with others. Think about that.
4. They are Easy to Buy
Surely, you know that the stock market makes it pretty easy for people to buy shares in every company they wish. There are three main ways you can buy these, through a financial planner, online, and broker. It’s needless to say that you need to create your own account before you can make any purchases. Furthermore, you can make these in a couple of minutes.
Thankfully, there are countless high-quality apps you can use to take participate in the market. Also, you can use trainer apps, which can provide you with a simulation of the whole process, like Stock Trainer. These will provide you with a high-detailed walkthrough.
5. They are Easy to Sell
Now that we’ve established that you can have some control even when the economy faces a crisis, it needs to be said that selling the stocks is also a pretty easy process. Surely, you’ve heard the term “liquid” being related to stocks. It means that the market provides you with a possibility to cash them out quickly and you will not be faced with high transaction costs.
Do research on your own, and you will see that they are pretty low. Of course, this is a really big advantage in the case when you need money urgently. In some cases, prices can be pretty volatile, which means that there’s a risk of experiencing a loss in this process.
6. Diversification
Now we would like to talk about diversification. The value of the stock market changes values independently from any other type of investments, like real estate and bonds. Holding these can provide you with a chance to have a better reaction than any other way of investment.
Furthermore, it can be said that they add risk to a portfolio, rapid gains, the potential for large, etc. At the same time, it helps investors to avoid all the dangers of overly conservative investment strategies. You can see that we are talking about a more flexible approach to the whole situation.
7. Low Transaction Fees
We’ve mentioned that transaction fees related to stocks are pretty low. However, we would like to discuss this factor in greater detail. In the highest number of cases, you will see that the price war among discount brokers has reduced stock transaction costs to zero, which is a pretty helpful thing, right?
At the same time, the highest number of brokers will provide you with a chance of selecting no-transaction-fee mutual funds. Certainly, we are talking about a process that will not take too much out of your hands, which is more than we can say for alternative investments.
