Table of Contents
- The Benefits of Investing in Stocks
- The Drawbacks of Investing in Stocks
- You Now Know the Pros and Cons of Investing in Stocks
About half of the American population has some money tied up in the stock market.
For the uninitiated, stocks are certificates of ownership in a publicly-traded company. The more you own, the more of that company you have a “stake” in. When you own a percentage of a company and that company increases in value, so too does the value of your investment.
In this post, we cover a handful of pros and cons of investing in stocks to quickly educate those interested in this investment vehicle so they can decide if it’s right for them. Keep reading to discover what opportunities await you!
The Benefits of Investing in Stocks
There’s a reason why stocks are among the most popular investment vehicles on the planet. While all the pros of stock investing go beyond what we can shove into our brief post, here are a handful of reasons why you should consider putting money into the market.
Stocks are Accessible
It doesn’t take much effort to discover how to invest in stocks and to make your first stock purchase. Just download any one of hundreds of trading apps, find a stock you’d like to buy, and complete the checkout process.
Money will be automatically deducted from your payment method and you’ll immediately be a co-owner in whatever company you’ve chosen to invest in.
Compare that to the trickiness of buying bonds or investing in privately-held businesses and it becomes clear that for investment convenience, stock investing is the way to go.
Getting Help is Simple
Does the idea of managing a stock portfolio scare you? You certainly wouldn’t be alone in having that feeling.
Managing a stock portfolio successfully means keeping tabs on companies so you know when to buy and sell shares. Fortunately, there are plenty of avenues you can go down which can help you automate that process.
For example, investing in a mutual fund means having a fund manager that makes money moves on your behalf. Investing in an index fund instantly spreads your money across several companies to automatically diversify your portfolio.
Of course, some people prefer to manage their stock trades manually. If you don’t have time for that though, working through funds is a great way to go!
Liquidate Your Assets at the Click of a Button
If you’re invested in a local, privately-held burger shop and you’d like to pull your money out of that investment, that might require conversations, the selling of physical assets, and other headache-inducing tasks.
When you’re invested in the stock market and want to pull your money out, all you have to do is press a couple of buttons and your money will be transferred back into your bank account.
That flexibility is powerful and rare when compared to other investment vehicles.
The Drawbacks of Investing in Stocks
No investment vehicle is perfect and investing in stocks is no exception. That point bridges us into the cons section of our pros and cons of investing in stocks write-up.
Below, you’ll find a handful of reasons why stocks may not be the right choice for your investment goals.
Nothing Is Guaranteed in Stocks
We’ve seen many people view stocks as a way to get rich quick or a means to accomplish their “how to live off dividends” ambitions. Several of those people end up losing every penny they put into the market.
That’s because the stock market is volatile. When you look at returns and losses over time, you’ll find that popular index funds can gain 20%+ in value one year only to plummet the following year.
All of that to say that if you’re used to getting stable returns through an interest-bearing savings account, understand that the stock market is not that.
Blind Investing Won’t Make You Money
If you’re an investing beginner that knows playing stock market is about buying low and selling high (while you wouldn’t be incorrect) that knowledge alone shouldn’t serve as the basis for your investing strategy.
People pour thousands into penny stocks with the intention of selling when they go up by a few cents only to find that bad companies go out of business more often than they appreciate.
You must either invest in index/mutual funds when stock trading or have a very good sense of the companies you’re putting money into manually. If you forgo those choices, you’ll lose more money in the market than you’ll make.
It’s Easy to Get Caught up in Hype
Given stock’s popularity, there’s a lot of hype peddlers out there that will try to sell you on buying certain companies, purchasing courses that’ll help you play the market better, and on several other stock-related things.
Be very wary of those pitches.
There’s no shortcut to stock success. What success boils down to is having the capital to invest big in sound investments and having a great understanding of what those sound investments are.
From there, the stock game is about being patient and having a pinch of luck on your side.
You Now Know the Pros and Cons of Investing in Stocks
Understanding the pros and cons of investing in stocks puts you ahead of the vast majority of investors. We hope the education you’ve received has helped you better appreciate whether or not the stock market is right for you. If you don’t feel it is, don’t worry!
There are plenty of other ways to invest out there that might better suit your needs. If you need insight on alternative means of investing or want to learn more about investing in stocks, we welcome you to check out additional content on our blog!