Many people don’t make it when investing in the stock market because they just jump right into it without knowing what the stock market entails. It is best to understand everything you can about investing to save you time and money and make as much money as you can at the same time. This is why you should understand the pros and cons of investing in the stock market.
Pros of Investing in the Stock Market
When it comes to investing in the stock market, you have two options. You can be too afraid to invest or you can jump in and take advantage of the opportunities that come with investing in the stock market.
Earn from Dividends
There are a lot of stocks right now which offer dividend yields. Many of them are higher than 3% and this is much higher than money market funds and treasuries.
Free Help and Advice
If you are very new to investing, instead of paying someone to give you advice you can easily go online and look the information up on websites and blogs. This is free to do and will only cost you a little bit of time and the money you pay for your Internet every month.
Stocks Beat Cash
Take a look back through history and you will see that stocks are always beating out cash in the long term and even beat inflation which is most important.
Potential for Long Term Growth
One of the best things about investing in the stock market is the idea of the potential for long term growth. You can create considerable wealth when you bring together your returns and dividends. If you aim for at least 8% every year from your investments, this will create $233,047 in just 20 years from $50,000.
Ability to Decide on your Risk Tolerance
When you invest in the stock market, you are able to choose your risk tolerance. This means if you want to keep it at a low risk, you can invest in companies with great records such as Wal-Mart. However, on the other hand if you want to take on a much higher risk with better returns you can invest in companies such as Facebook and Google.
Cons of Investing in the Stock Market
Problems with the Eurozone are getting worse every year. So much so that they are making it seem less desirable to invest in the stock market.
Another Banking Crisis Risk
There is always a risk of another bank crashing like the one that happened in 2008 and 2009. If this happens again, there is a chance of another world recession and the stock market crashing.
Never be Risk Free
Investing in the stock market is not and never will be risk free. You will always hear people saying that the stock can go down as well as up. Stock investing and trading is a business and should always be treated like one. Business always takes risk. However, if you know what you are doing before you do it, you have a better chance at coming out at the top.
This guest post comes from freelance writer Victoria. She writes on topics such as the stock market investment.