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What are the pros and cons of investing in stock?

What are the pros and cons of investing in stock?

We always look for some or the other type of investment to grow our wealth. We invest in assets, different businesses, equities etc. All these sources of investment have their own advantages and disadvantages and no one is superior to the other. If we think about equity or stock; they are the shares of the company which are publicly traded. If you are a shareholder you will enjoy your profit when the company is successful. The companies like Apple, Disney are publicly traded which gives the opportunity to individual investors to invest in the company and become a part of a successful company. On the contrary, the wealthy investors invest in smaller companies to help them grow into a more significant prospect. So, is it safe to invest in stocks?

Pros of investing in the stock

  • Highly liquid

You can buy or sell any stock trading on a major exchange. The stocks are highly liquid which is why you can convert them in cash if needed swiftly. It is needless to say buying and selling stock is really flexible.

  • Highest returns

The primary objective of investing money is to have better returns and stock exchange perhaps gives you the highest returns. The stock exchange has given the highest historical incomes over a long term. Investing in the stock exchange is a wise decision if you are expecting higher returns. If you want your portfolio to increase then the stock exchange is the answer.

  • Advantage of growing economy

When the economy of the country is growing the corporate companies will also be benefited. The economic growth will give rise to more income; there will be an increase in demand and the company’s revenue will ultimately increase.

  • It is also easy to buy. You can buy the stocks within less than a minute.

However, people investing in stock will also have to suffer some blows. Here are its cons

Cons of investing in stocks

  • Extremely volatile

The stock market is famous for being volatile that means stock prices can rise and fall at any time. It makes the stock market highly volatile and very much risky. An overreaction to a bad or good new can create havoc in the stock market.

  • It requires a lot of homework

Even though it looks easy to get profit in a stock market, on ground level one needs to have a lot of homework regarding the stock market. You have to do research on the company, understand their working, your financial statement, whether it is profitable or not etc. You also have to understand the behavior of the stock market as you can buy or sell at the right time. All of this requires a lot of homework and consumes a lot of time.

  • You could lose the investment

If a company is doing poor business then the investors will immediately sell the stock which will reduce the stock price drastically. When you sell the stock you lose the initial investment. There will be an income tax break if you lose money on the stock.

All in all, investing in equity or stock has its pros and cons. If you study the stock market cautiously and buy or sell the stock at the right time, the stock market can bring you a fortune for sure.

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