Benefits of investing in Stock Market
Do you frequently hear about a friend of a friend, relatives, or coworkers who have made a lot of money by investing in stock markets, and then think it’s a fantastic idea to do so? However, you tend to worry about the disadvantages of investing, such as risk and the fact that it might be time-consuming. But, diversifying your financial portfolio beyond fixed deposits, gold, and mutual funds is essential and has numerous advantages.
Furthermore, with the advancement of technology, investing has become much easier; presently, purchasing or selling stocks is as simple as clicking a button. Now any of you can invest in the stock market and reap all of the rewards that come with it. Allow your money to work for you while you relax and enjoy yourself!
Here are some of the advantages of investing in the stock market:
The ability of the market to generate the kinds of gains it does is the most essential component of investing directly in markets.
Stock markets have always stood the test of time, rising in value over time, even though individual stock values fluctuate daily, according to historical data.
Investing in companies with a consistent growth pattern and increased earnings every quarter, or in industries that contribute to the country’s economic growth, will result in you steadily developing your wealth and increasing the value of your investment over time.
Safeguard From Inflation
The fundamental goal of investments is to guarantee our future, but we must keep track of inflation regularly.
Our gains will be nil if inflation and the rate of return on investments are comparable. In an ideal world, the rate of return on investments would be higher than inflation.
Stock markets, or benchmark indexes (in India, the Nifty and Sensex), have consistently outperformed inflation.
If inflation is about 3-4 percent, for example, markets have seen annual returns of around ten percent.
Stocks are considered liquid assets since they can be easily converted to cash and have a large number of purchasers at any given time.
The same cannot be said for all assets; some, such as real estate, are difficult to sell. It could take months to see a return on your home investment. It is, however, much simpler in the case of stocks.
On the NSE and BSE, the average daily volume of transactions is high, indicating that there are several buyers and sellers for a single stock.
Profit From The Booming Economy
The stock market is always a factor in a thriving economy, and it responds to all economic growth indices like GDP, inflation, corporate earnings, and so on.
Investors in the stock market can directly benefit from a thriving economy, and the value of their investments rises in lockstep with economic expansion.
When an economy is growing, corporate earnings rise, and as a result, the ordinary individual’s income rises.
As a result, customer demand rises, increasing sales. As a result, the value of your investment in a specific company rises, i.e. the share price rises.
A Well Regulated and Transparent Framework
The Stock Exchange Board of India regulates the Indian stock market (SEBI). SEBI is in charge of regulating stock exchanges, promoting their development, and safeguarding investors’ rights.
This means that when investors participate in financial products on the stock market, their interests are well-protected by SEBI’s regulatory framework, which helps to reduce the possibility of corporations engaging in fraudulent activities.
Flexibility To Invest In Smaller Amounts
As a novice investor, you can begin with tiny market investments by purchasing small-cap or mid-cap stocks, or large-cap stocks in smaller units. Stocks do not require a large initial investment.
Another advantage of directly investing in stocks is that you can buy at your leisure; you are not obligated to invest a certain amount every month.
Benefits from Dividends
A dividend is a source of additional income for investors that most corporations payout once a year.
Dividend payments are made even if the stock has lost value, and they represent income in addition to any profits made from the stock’s eventual sale.
As your investment portfolio grows over time, dividend income might assist fund a retirement or pay for even more investing.
You must actively consider stock market investing and diversifying your financial portfolio to remain ahead of inflation. Aside from that, you’ll have complete control over whatever companies you invest in, as well as a much-needed liquidity cushion.