How Investing in Stocks Can Help You in the Future
The stock market can be intimidating at first, but it only takes some reading and research to realize how it can help you in the future. In a nutshell, stocks is the smallest unit of ownership in a public traded company, and having stocks carry certain rights and privileges such as sharing of profits.
One can profit from stocks through two different methods – investing and trading. As opposed to trading, which involves a more frequent buy-and-sell of stocks, investing involves buying and holding a portfolio of stocks for years, with the goal of gradually building wealth over an extended period.
This is regardless of the fluctuation of the market, as the expectation when you’re investing is that prices will rebound over time, and losses will be recovered eventually. Investing in stocks enables you to enjoy perks like interest, dividends, and stock splits along the way.
Here are three reasons investing in stocks would help you in the future:
You don’t need a lot of money to invest to win
The most common answer to why people don’t invest in stocks is that they couldn’t afford to. If you’re thinking the same thing, then you are wrong. In fact, you can afford to invest in stocks.
With stocks, putting aside as little as 5-10% of your income will go a long way. The sooner you invest, the less money you need to save overall for a happy retirement because the small amount you’re putting aside monthly will eventually work for you.
The earlier you start, the more time your money can grow
Only 1/3 of millennials (ages 18 to 35) invest in the stock market, and you should be one of them. Starting young would enable you to take advantage of compound interest, as opposed to the small interest your money would get when you just let it sit in the bank.
Not to mention, the more time you allow your money to work for you and generate wealth.
Historically, stocks have offered the most potential for growth
If you look at what a $100 in 1926 would be worth in 2016 over the history of the U.S. stock market, it would be a whopping $587,000. Historical data such as this shows that stocks offer the most potential for growth, compared to bonds, commodities, or treasury notes.
The key to all this is thinking long term. Keep in mind that the stock market behaves as it has over long periods, so rest assured that you can ride out market drops and generate wealth over the years, as long as you stay the course over the long term.
There is no magic formula for success in investing in stocks. All it takes is hard work such as doing your homework and learning the fundamentals of investing, researching on companies worth investing, developing a solid allocation strategy that ensures you have a diversified mix of investments, and consistently investing over time.
It’s never too early to start investing and saving for your retirement. Start now so that your future self will thank you.