The Benefits and Drawbacks of planning to Buy Stocks and Investing in the Stock Market.

Any working professional having the basic knowledge of investments will have the thought the of investing in the stock at least once in their life. That is because stocks are tempting and they surely do offer an easy way to earn profits. For having a diversified and impressive portfolio it is important to invest some money in the market and enjoy its giveaways.

Even though, there are various ways of investing money through; mutual funds, real estate, gold, bonds, investing in stocks remain the favorite option for investors who want to make huge profits in a short span of time.

Now, what are stocks? Well, stocks are nothing but a share in the ownership of the company, on which, when invested, the investors represent a claim on the company’s profits and earnings.  The more the investor starts to Buy Stocks, the claim of the investor over the company also increases.

It is not that difficult to understand the working of the stock market. However, as a beginner, one should always start investing with small amounts, like some 500$ around. It isn’t compulsory for investors to start with the big shot companies; instead, investors can also invest in smaller companies with the potential to grow bigger in the future.

Some of the pros and cons on the road to buy stocks are:

  • Highest Returns: Stocks have given one of the highest historical returns among the various asset classes over the long term. Buying and selling of stocks can give lots of gains unlike bonds and some other alternatives.
  • Income from dividends: Majority of the companies usually distribute a portion of its earnings to its shareholders and is an investor looking for passive income, a dividend-growth strategy can pay off very handsomely.
  • Stocks are easily diversified: One can invest in a number of stocks in different countries, sectors, and industries which shows various growth opportunities and diversifies the risk factor.

Being a part of the stock market has some serious risks attached to it:

  • Volatile in the short term: There is no security of the money invested in the stock market as stock prices can raise or fall sharply because of an overreaction to good or bad news. This volatility makes stocks riskier than something like bonds.
  • Pick the wrong stock, and one loses the value of the investment. Similarly, a poor performing company can see its dividends fall or stagnate.

Hence, the investor has to be extra careful while investing in any company and should take multiple suggestions before taking the step.