Advantages Of Investing In The Stock Market

For most of us, buying stocks are among the best long term investments. The stock market can provide us with a stable and reliable method of building our wealth long term. Below are some advantages of investing in the stock market:

1 Since World War II, stocks hae consistently outpaced the rate of inflation (except for a few short periods). Inflation always goes up and down, but stocks tend to continue to rise with time.

2 Stocks typically outperform all other investment options over a ten year period.

3 Most high quality stocks will oten split if the price reaches a certain level. This means that each share is divided up into one or more new shares with the price divided along with it. So for example, if one of your stocks undergoes a 3 for 1 stock split, you will end up with 3 shares for every one that you previously held. This means that the price of each new share will be 1/3 of what is was before, but lower priced stocks can prove to grow faster than the higher priced ones.

4 Buying stocks gives you partial ownership of the company in proportion tot he number of shares of each stock purchased. As a part owner of a company, you now have an opportunity to share in the financial success and growth of the company.

5 Stocks can be very good for those of use wanting retirement plans. You should concentrate on buying stocks when you are younger or in your middle years to receive a good financial return in your retirement years.

This said and as with most things, there are also disadvantages of buying stocks. A few are listed below:

1 Stocks can be very volatile depending on many factors that are beyond your control. In reality the most effective way to invest in stocks is to buy and hold for the long term.

2 Because stocks can be volatile, especially in the short term, as you begin to reach retirement age you may want to gradualy move part of the your assets into other sectors. The closer you get to retirement age, the more riskts you assme with stocks.

3 Companies can and do go out of business, any stocks you may have in a company that goes out of business will become worthless. By selecting your stocks carefully you should be able to minimize this risk.

4 Buying and selling of stock costs you money in the form of brokerage commissions.

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