Stocks are just one way you can put your hard-earned money to work. Why choose stocks over other investments like bonds, rare coins, or old sports cars? For one, stocks are the best place for smart investors to put their money because they have the highest potential returns. Plus, no other type of investment tends to do better over the long term than stocks.
History has shown that investing in good stocks can give you better returns than most other ways to put your money to work. This gives you the best chance of reaching your financial goals and lets you enjoy the benefits of having your money work for you in the future.
If you’re still undecided, you’ve come to the right place. In this article, we’ll look at some of the most important reasons why investing in stocks is a good idea.
1. To Keep Up With Inflation
Inflation is a crisis in which prices are going up, and the buying power of money is going down. Overall, inflation is not something that most people want.
Let’s look at an example of inflation to see how it works: Say you have Rs 5 lakhs in your bank account and want to buy a car that costs Rs 5 lakhs right now. But you changed your mind and decided to wait until next year to buy the car. You kept the money in your savings account.
You’re getting a reasonable interest rate from the bank, which is 3.5 percent PA. Now, let’s jump to the year after next. You went to the bank and got your money, which has grown to Rs 5.17 lakhs. Then you went to a car dealership. But, bang! You’re shocked.
The price of that car is now Rs 5.5 lakhs, which is a lot. You could have easily bought the car last year, but now you can’t afford it. That’s called inflation. The same happens when you buy groceries or any other product: the price increases over time.
Overall, you need to invest your money wisely in things that give you a high return if you want to beat inflation, and the stock market is where smart investors should put their money.
2. Capital Growth Potential
In India, stocks and real estate have been the best investments for the past 20 years, beating out all other types of investments.
Whether fixed deposits, insurance, bonds, or commodities like gold, silver, petroleum, etc., the stock market has outperformed all of these investments and given the best returns. Since the stock market has a lot of room to grow, it is always a good idea for people who want their money to grow to buy stocks.
3. Your Money Does The Work
It’s essential to have money to buy comforts and for everything else in life. Most people say they don’t work for money and that not having enough money is the leading cause of most problems. But the answer to this problem is to invest.
You don’t have to do anything if you put your money into good companies. As the business does well, so will your money. In the meantime, while your money grows on its own, you can focus on your main job or spend your time in any way you want. So, instead of having to work for money at your main job, you can make your money work for you. Because of this, it is considered one of the top 10 reasons to buy stocks.
4. Huge Capital Is Not Required
Many people have the wrong idea that they need a lot of money to start investing in the stock market. But that’s not right. You can start investing just enough money to buy a chicken sandwich.
Several stocks have prices that are less than $10. You only need to put in a small amount of money to start making good money. Other types of investments, like gold or real estate, don’t give you this choice. Also, remember that doing a little bit every day adds up to a big result.
5. No Need To Be A Genius
Peter Lynch, one of the most well-known fund managers, said, “If you can understand fifth-grade math, then you can understand the stock market.” He is known to always encourage regular people to buy stocks, and he thinks everyone should be able to do so. A lot of other experts also believe that stock investing is not rocket science.
In order to get started in the stock market, you only need a small amount of money, some knowledge, time, and interest. Investing in the stock market is a good way for anyone to make money.
6. Ease Of Investing
With an online brokerage account, it is now much easier to invest and trade. With the help of the best online brokers, you can now buy and sell stocks on your smartphone in a matter of seconds.
Also, it’s easier to find and choose stocks now that more financial websites and apps exist. You no longer have to read boring financial newspapers and magazines or rely on newsletters to learn about a company’s finances.
7. Tax Breaks
When you invest in the stock market, you can get many tax breaks. For gains over $100,000, the long-term capital gains tax is 10%. Still, this is better than the return on FDs, which is only 6.5% and is taxed between 10% and 30%, depending on your tax bracket. This is why the saying “The rich pay less tax” is so well-known.
8. No Need To Find Hidden Gems
There are a few other examples of common stocks that have given returns of more than a few hundred percent over the past few years, including Asian Paints, Hindustan Unilever, HDFC Bank, Symphony, Maruti Suzuki, Titan Company, etc. People, in general, can find these growing businesses near them because they already use their products.
In short, you aren’t always supposed to find a hidden treasure or a rare stock. You just have to look around for top companies with great products and put the money into them.
9. Supplemental Income
We have always been told in school, “Get a high-paying job that is safe and secure.” What isn’t taught is what will happen if you get fired, or the business goes out of business. We should always have more than one way to make money. For regular people, investing in the stock market can help them get this extra source of income.
Most people spend all of their time at work their whole lives. Investing in the stock market can be a second way for these people to make money. With value growth and dividends, they can steadily bring in more money. People need to start investing in the stock market because of this.
10. The Power Of Compounding
Investing in stocks lets you take advantage of compound interest, which makes your money grow quickly. Most savings accounts at banks give you a simple interest rate. But if you invest in stocks, you can get returns that grow over time. Albert Einstein, a famous scientist, once said, “Compounding is the eighth wonder of the world.“Warren Buffett is known as the best investor in the world. His average return over the last 50 years has been around 22%. Also, this long-term return has made him one of the wealthiest people in the world. One of the main reasons why people should put their money in the stock market is because of the power of compounding.
