The first stock market was created in the early 17 century and continues to exist today. For the past four centuries, the stock market and real estate have been the two most successful investment vehicles. Investors have been jittery about investing in the stock market lately, but there are still reasons why investing in the stock market is a good idea, including:
Liquidity
Liquidity refers to the ease and speed you can buy and sell an asset. When you buy shares on the stock market, you can hold on to them as long as you want or sell them as quickly as possible. Regardless, you will be able to find a buyer if you offer them a fair price. The stock market’s liquidity makes it easier to get cash if you need it or to buy other assets when the opportunity arises. Liquidity is also a great tool to prevent losses as you can sell an investment before you lose all your money.
Barriers To Entry
When trying to enter other markets, you will encounter various barriers to entering that market, for example, licenses, capital requirements, and cartels. However, there are essentially no barriers to entering the stock market. You can invest in the stock market as long as you have a brokerage account and some money. There is no minimum amount to invest in the stock market, and you can buy stocks for under $1. The capacity to participate in the stock market so easily makes it a great investment vehicle, especially for those beginning their investment journey. They can invest little and increase the amount as they gain knowledge and experience.
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Diversification
The classic saying is ‘do not put all your eggs in one basket, and no place is better for diversification than the stock market. There are thousands of companies in the stock market, so you can pick an attractive basket of stocks to hold in your portfolio. You cannot wholly eradicate risks in investment, but you can reduce risk via diversification because it allows you to spread your risks. Therefore, if one stock or sector in the stock market underperforms, you can still have positive returns if you are well diversified, making it an excellent reason to invest in the stock market.
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High Returns
The stock market is designed to go up over time, meaning that your wealth will grow when you invest in it. However, the stock market can do a lot more than that. The stock market has great potential for your investment to have high returns. With a well-placed investment in an undervalued stock, your investment can grow many times over in a matter of months or years. A stock market investment has unlimited capacity for growth, meaning there is an infinite capacity for high returns. Few other investment vehicles can offer you the same degree of profit.
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Beat Inflation
Inflation means that your money has less purchasing power, so you need more money to buy the same goods and services. Therefore, you need an investment vehicle that grows faster than inflation which stocks have done throughout history. The stock market will provide you with a hedge against inflation, ensuring your wealth keeps growing, and you can increase your purchasing power even when inflation rises.
There are many reasons to invest in the stock market. The ones above are but the tip of the iceberg. Talk to an investment advisor and find out how you can start investing in the stock market.