4 Advantages and 3 disadvantages of investing in stocks
Nowadays, more and more people are investing in mutual funds, stocks, etc. to get better returns in the long run. This investment forms a secondary income apart from your regular job. In all the investments, investing in stocks has become one of the most common investment tools.
But there are also certain disadvantages in investing in stocks. Read on to know the advantages as well as the disadvantages of investing in stocks.
Advantages of investing in stocks
If you know the correct time to sell and buy stocks, you can easily go for this type of investment. Check out the advantages you get when you invest in stocks:
1. Great returns
This is the foremost advantage of investing in stocks. There are certain companies that issue their stocks to raise capital and you can buy the stocks and sell them when the price increases. This helps you get better returns that is you get more than what you invested when you bought the stocks. You just have to do your homework well. You have to have knowledge about the position of the company in the market and also the profit that it’s making.
2. Accessibility of stocks
This is also another advantage of this type of investment. You can easily get access to the stocks of the company you’re investing in. The stocks are available in the market. So with proper knowledge and research you can easily buy them.
3. Excess liquidity
The stocks are highly liquid that is, they can easily be converted in cash. If you sell the equities with other traders in the market, you can easily convert them in cash and save them for the future.
4. Other benefits
Since you’re the stockholder of a company, you can also have voting rights in the company and can elect new members of board of directors. You can also reduce the amount of taxes from the gain.
Disadvantages of investing in stocks
There are also loopholes in investing in stocks. Get to know the disadvantages which can help you in your further ventures:
1. High risk value
The risk value is quite higher than other investments. In this, you must buy the stocks of that company which has a financial security. But if the company goes bankrupt, you also incur heavy losses.
2. Volatile prices
The stock prices tend to be very volatile and erratic. When the price of the stocks may rise and fall is unknown. When the price goes down, the stockholders may panic and sell off their stocks which only make them lose more.
3. Fee of the brokers
This is an important point to consider. You have to employ a broker to inform you about the best deals of the stocks in the market. They also charge heavily for their services.
The advantages and the disadvantages will help you to learn the basic norms of investing in stocks. If you know well, it can help you after retirement as well as get out of any type of debts you may have incurred. Learn how to profit by investing in the investing stock market.