Why Should You Invest In Stocks?
Historically, stocks have a higher return on average than bonds or savings accounts. Of course, there are also some risks. Learn more why should you invest in stocks in this article.
What Are Stocks?
A share is a stake in a company. In other words, you buy a certain part of the company's property. Companies issue shares that represent part of the company. These can be few shares, but listed companies can also be millions of shares. A shareholder therefore owns part of the company in proportion to the number of shares he holds.
Why Invest In Listed Stocks?
A listed company uses the money collected on the stock exchange for new investments to create added value. This can further support the economy and the stock price. Shareholders can benefit from this in turn.
You get a value back for your money, namely a share in a company. If this company is doing well and the price rises, the value of your share will also increase. You may also receive a dividend dividend.
Equity investment risks
One of the most important risks is that you have no guarantee that you will get your money back: you do not know in advance whether the company will make a profit or a loss. In a recession or bankruptcy, for example, stocks can lose all or part of their value, causing you to lose all or part of your money.
Factors To Determine The Market Price Of A Share
In addition, there are a variety of factors that determine the market price of a share.
Factors related to the company itself: the company's results and financial situation, the industry in which it operates, how well the company is run, etc.
External factors: political events, economic developments, natural disasters, etc.
The unpredictability of the interaction of these factors can lead to considerable price fluctuations on the stock exchange. Both positive and negative. you've to visit financial earnings website.
How can you reduce the risks?
Spread out
Simply put, if you spread enough, you are not dependent on the results of a single company or sector. If you invest in many different companies, your profit or loss is not determined by the result of a single company or sector.
Long-term thinking
Historically, stocks have long-term positive returns. This does not mean that there may not be an occasional recession or even a stock market crash. But so far the global economy has always recovered and the markets have risen to new record highs.
It is therefore advisable to invest with a sufficiently long term. In this way, you benefit from a potentially high return when things are going well and you can bridge crises when things are going badly.
Get in sprinkled
It is one of the most frequently asked questions by beginning investors: when is the best time to get on the stock exchange? It is ideal immediately after a stock market correction, because then you buy shares at a discount. However, those who are waiting for it may miss out on good returns for many years. The problem is that no one can predict when the next big slump will happen. A sensible strategy is therefore a wise entry. Specifically, you then invest a certain amount each month. In this way, you won't miss a return by delaying getting started. And at the same time, avoid the situation of buying stocks with a large amount of money that lose a lot of their value after a crash.
