Learn All the Pros and Cons of Investing in the Stock Market Before You Make a Move

Photo of author

(Newswire.net — May 24, 2018) — Stocks, also known as equities, are shares of ownership in a company that is usually traded. Once you buy those shares, you automatically become a shareholder of that particular company and get to share profits and see the value of the shares bought. 

Most successful companies today are publicly traded, giving you, an individual investor, the opportunity to own a piece of these large companies. Remember, brokers are able to advise you accordingly so that you know what company to invest in. You can also look up information online like the Questrade review to learn how the market generally works.

Definitely, just like any other investment, it has its pros and cons that would either attract or discourage you from investing in it. You have to weigh each option carefully to avoid just investing in stocks that will not benefit you as you would want.   

The Pros and Cons of investing in stocks

The Pros

  • Stocks allows you to gain higher returns – Stocks have been named one of the highest historical returns among the various asset classes for long-term investment. If you are looking for growth over a period of time, investing in stocks is the way to go because you will reap the benefits of long-term investment. 
  • Stocks give you an income from dividends – Many companies distribute a good portion of its earnings to its shareholders. If you are looking to invest and earn some passive income, a dividend growth strategy can surely pay you off handsomely. 
  • Stocks are easily diversified – You can invest in a variety of stocks in different sectors, industries or even countries that will give you numerous growth opportunities and diversify your risk. This is a secret that many stock traders do not know. They only think they can trade only in companies within their country. 
  • Stocks are highly liquid – Most stock trading, especially from reputable companies, can be easily bought and sold. The liquidity gives investors the flexibility to convert their stocks into cash as they wish. Such liberty is not experienced in other types of investments.

The Cons

  • Stocks are volatile in the short term – Stock prices occasionally rise or fall depending on the surrounding environment. For example, overreaction to good or bad news makes stocks riskier than bonds.
  • Stocks can because you to lose the value of your investment – If you happen to choose a poorly performing company, you risk losing the value of your investment because of the value increases or decreases with the performance of the company.   
  • Stocks can be tough for a newbie – It takes intentional knowledge to analyze any type of stock, but it also requires more time and effort to think through the list of stocks and pick the right one. This is not an easy task for newbies and if wrongly advised and guided, they can end up making the wrong decisions that are costly.  
  • Stocks can put you in a major risk crisis – If a company goes down, it goes with your investment. This can put you into a major crisis, especially if you had invested all your money in one company.