Investing in the stock market as a beginner can be frightening based on the account of how the market plummeted internationally in 2008. It may even be unattractive to novices because no one can guarantee the invested capital let alone the gains and dividends.
Even though there are definite risks associated with this kind of investment, using the appropriate approach, stock market investing may be profitable and offer returns that are higher than the inflation rate even at all-time highs.
One of the objectives of investment is to make the investors’ money work for them. The most time-tested way to grow wealth and determine one’s net worth is an investment in the stock market. Typically, investing in the stock market should be a long-term strategy for accumulating wealth through diligence and consistency. However, it can be a medium- and short-term strategy that must be closely and frequently handled by experts – Active trading. Day trading, which is the act of buying and selling a financial instrument on the same day, or maybe numerous times throughout the day, is one of the short-term investments made on the stock market.
There are various reasons why investing in equity is beneficial.
- Ownership of your desired Company – Investing in equity qualities you as part owner of your desired company even with just a single share of the company. As part owner, you have the right to vote, attend shareholders’ meetings, receive dividends and other perks, etc.
- Inflationary curbing returns – An investment in equities is one of the investments that, in this economy with rising inflation, can produce returns that are higher than the inflation rate.
- Diversification benefits – One method to create a well-diversified portfolio and reduce concentration risk is to invest in the stock market.
- A steady flow of income – Investing in certain companies with good fundamentals and policies that support consistent dividend payments will ensure a stable income stream.
- Free entry and exit market – Investing in the stock market is an easy form of investment. The process can be through a primary market initial public offering (IPO) or the Stock Exchange’s trading floor (secondary market). The process can be guided by a registered broker who serves as an adviser in the primary market and an intermediary between buyers and sellers in the secondary market.
- Regulated market – investment in the stock market (a subset of the Capital market) is safe, secure, and regulated by the Securities and Exchange Commission (SEC) with a mandate to protect investors and ensure investors’ confidence and market integrity.
- Non-expert is allowed – To be an investor in the stock market does not require any financial certification. However, getting a licensed stockbroker to guide you through the process is recommendable.
To be a successful investor in the equity market, it’s critical to have a firm grasp of the stock market’s fundamentals. Open an account with a trustworthy broker that can assist with research materials of your desired companies before you purchase their shares. Also, be informed that your money can grow over time if you make frequent small investments over a lengthy period.