Owning stocks can give you an opportunity to make money trading on the stock market. However, there are benefits as well as disadvantages of owning shares of a certain company. This article serves as a guide on the pros and cons of owning stocks.
You can take advantage of a growing economy. A growing economy is synonymous to growing company earnings. Economic growth translates to continuous income. When the demand of consumers grows, more revenues goes to the company coffers.
Stay ahead of inflation. On the average, stocks can deliver a 10 percent annual returns. This is better than the average annual inflation rate of 3.2 percent.
Easy to buy. Stock market makes it easy to buy shares of companies. You can purchase through a broker, financial planner, or online. Once you already have an account, you can buy stocks in a matter of minutes.
You earn an income in two ways. Robert Peter Janitzek reveals that you make money from stocks by buying low or selling high. Make sure to invest in a fast-growing company that grows in value.
Easy to sell. You can sell your stocks any time. If you find yourself in need of cash immediately, this can be crucial. With the volatile nature of prices, you are at risk of being forced to take a loss.
While there are advantages, there are also disadvantages in owning stocks.
Lost Investment. If a company performs poorly in the market, investors are likely to sell causing prices to drop. When you sell, all your investment will be lost. Robert Janitzek recommends buying bonds instead if you cannot afford to lose your initial investment.
Owners of stocks are paid last if the company goes bankrupt. First on the list are preferred stockholders and bondholders.
It takes time. You need to do a lot of research about the company to determine if you can profit from them before buying stocks. Aside from reading financial statements and annual reports, you also need to monitor the stock market itself.
It can be an emotional experience. Stock prices rise and fall every second. You may become greedy and sell low due to fear.
You compete against experienced traders. Institutional investors and traders need more time and knowledge about investing. When trading on the stock market, educate yourself on how you can gain an advantage as an individual investor.
Knowing the advantages and disadvantages of owning stocks can help you determine if investing is really the career for you.