Top Benefits of Investing in the Stock Market

Top Benefits of Investing in the Stock Market Historically, a large number of investors have been able to enjoy generous returns through the stock market over time, but it is also a fact that the stock market can go down as well. This means that there is a possibility of both profits and losses when it comes to the stock market and it has its risks and returns. However, if you are interested in investing in the stock market, there is no doubt that it can provide some very prominent benefits that can make it a good choice. What are these? Some of the top benefits are highlighted below:

Benefit 1: Stock ownership helps to take advantage of a rising economy

One of the biggest benefits of investing in the stock market is the fact that this investment enables you to take advantage of a growing economy. With the growth of the economy, corporate earnings also increase. This is due to the fact that economic growth creates new jobs, which increases income and this can lead to higher sales. The bigger the paycheck, the greater the boost experienced by consumer demand. This will also increase the revenue earned by companies. The more earnings they have, the more you will receive.

Benefit 2: Stock investment is the best way to stay protected from inflation

If you take a look at past statistics, you will realize that stocks can offer an average annual return of 10 percent. This is considerably better than the average annual inflation rate of 3.2 percent. Nonetheless, bear in mind that it means you have to have a longer time horizon. Hence, even if there is a temporary drop in value, you can buy and hold the stocks as they will protect you against inflation.

Benefit 3: Stocks are easy to purchase

Buying shares of companies is made easier through investment in the stock market. You can purchase them online, through a financial planner or a broker. After you have made an account online, it will take you only a few minutes to start buying stock. These days, you can find a number of online brokers who give you the opportunity of buying and selling stock easily and without any extra charges.

Benefit 4: The stock market allows you to make money in two ways

Most of the investors who put their money in the stock market decide to purchase low and then sell high. They put their money in fast-growing companies, which are going to appreciate in value. This is an attractive option for buy-and-hold investors and also day traders. The former prefer to take advantage of trends in the long term i.e. they want to see the company’s stock price and earnings grow over time while the latter enjoy taking advantage of short-term trends. Both kind of investors believe that their stock-selection skills enable them to outperform the market. There are also those investors who want to get a regular stream of cash so they buy stocks of companies that pay dividends. Such companies are known to grow at a moderate pace.

Benefit 5: Stocks can be sold easily

Another good reason to invest in the stock market is that it allows you to sell your stocks whenever you want. The term ‘liquid’ is used by economists to refer to stocks because it is possible for you to turn your shares into cash rather quickly and you have to incur very low transaction costs. This can be immensely helpful if you need your money urgently. But, you should bear in mind that prices in the stock market can also be volatile so there is a possibility that you may have to bear a loss.

Benefit 6: You can get some investment gains

Another notable benefit of investing in the stock market is the opportunity of growing your money. With the passage of time, the value of the stock market increases, even though the prices of different stocks tend to rise and fall on a daily basis. When investors put their money in stable companies that are able to expand and grow, they can earn profits. Similarly, investing in a variety of stocks can also help you in building your wealth because you can leverage the growth in various sectors of the economy thereby leading to an overall profit, even if some of your individual stocks fall in value.

Benefit 7: Stock market investment allows for diversification

For people who enjoy putting their money in different types of investment products, investment in the stock market can provide them with diversification. The value of stock market investments can change independently as compared to other types of investments, like real estate and bonds. You will be in a better position to weather losses in other forms of investment when you are holding stock. With stock, investors are also able to avoid overly conservative or risk-averse investment strategies because it adds risk to a portfolio and also gives the potential of rapid and large gains.

Benefit 8: Stocks give you dividend income

As mentioned earlier, some stocks can give you income in the form of dividends. While not all stocks may give you dividends, but those that do, will provide you with annual payments. The best part is that you will receive these payments even if the stock has declined in value because they represent income on top of the profits that you will eventually make when you sell the stock. With dividend income, you can expand your investments or you can use the money for your retirement fund.

Benefit 9: Stocks make room for delayed taxation

Another benefit of investing in the stock market is that they help delaying taxation on gains. If you purchase a stock and its value increases, you will not have to file a return on you earnings. The gains in stock will only need to be reported when you decide to sell the shares for a profit. Furthermore, if you incur a loss, you can use it for reducing your taxes on other gains.