Why you should invest in the stock market

Dear Humans

A stock market is an exchange platform to trade shares in publicly listed companies. It is a gigantic system built for the biggest companies in the world to use your money and other peoples money to serve the company in which profits and losses are made.

Please note this is not a quick-rich scheme guide, your brain will have to be used and you will have to take risks and read as much information on companies as possible and make informed decisions.

A prime example is the S&P 500 which consists of 500 of the largest U.S. publicly traded companies that have returned 6% to 10% per year. At that rate, only $9,000 invested in the stock market 50 years ago would have grown into more than $370,000 today. In the long term gains, the stock market is truly epic.

I have compiled reasons to help you understand why the stock market can be your vehicle for creating wealth over a long period.

Grow your money 

This one is pretty simple. If you have £500 saved up in the bank. In 10 years, it will still be £500 but if you can invest your £500 in a company that provides services and is in constant demand, your money will make more money as the cash will flow and the money will be at work. 

Building a Portfolio of Wealth. 

Money in one basket is dangerous and should be avoided, Your investments should cover a broad range of markets e.g staples, electronics, travel services and others to keep your money flowing in all sectors of services and development. In that case, your portfolio will build up over time in various sectors and a wealth portfolio will be achieved. The stock market can be a way to increase your financial portfolio if you already have a business and rental properties in your portfolio.

Avoiding Inflation. 

Inflation is in a constant battle with money. Savings will always be eaten up every year if not invested or put to good use. I would like to share a personal example from my childhood for this, back when I was in school my mother gave me £1 to spend as a snack during lunchtime and I would always get a Freddo chocolate bar. At the time it was only 5p, if I had saved that same £1 today and used it now at the corner shop to purchase a Freddo which is now at 25p, I would have lost five times as much value in the £1 I saved up for almost 15 years of my life. You can see from my experience that the rise in goods over some time erodes purchasing power. However, if this £1 is put to use in the economy as an investment it can constantly be working rather than sitting idle. This is where the stock market can help by putting that £1 to use rather than sitting in a jar collecting dust.

Dividend Growth for a steady income 

Dividends are payments made by the company over a year and can range from 2% to 10%, Some are stable and others are not but this can be researched and invested accordingly. You can almost say dividends are your money making money and if you get it primed well you can be getting money for your money whilst you sleep. Dividend stocks also help to beat the inflation rates and show the health of a company.

Diversification. 

Money flows in all sectors of life, from mobile services to food to even water supply, money is flowing constantly around us in various sectors, so instead of your money being stuck in one particular product or service which may or may not be in demand. The stock market gives you access to various systems which can be invested to push the economy as people are already working day and night in the companies listed on the market. 

Owning a company you love. 

The stock market gives you a chance to own a piece in a company you love and would like your money to be a part of. I use eBay, Etsy and Shopify daily so owning a piece of them sounds amazing to me as an investor.

Joining the economy

I believe that investing in companies helps move the economy and keep it in flow, Money sitting around is doing nothing and just collecting dust instead of being part of the system, The stock Market provides this door to keep services, paychecks and wages in flux and constant movement of services around the world.

Giving something back 

I always believe that it's good to give back to the community that provides services around you as a way to be grateful for it. I enjoy a Starbucks coffee, My iPhone and clothing from Primark. This way I can give back to the companies that have given to me over the years. I can invest in their services and products as I use them too and appreciate them throughout my life.

it is easy and fast. 

I have had the chance to invest in an upcoming platform that does not charge and is very easy to set and use. If you top up £10 on Freetrade using the link me and you both can get a free share of up to £200, It can be your first step to building your wealth too. Click Here to jump-start your portfolio and get started with a free share today! it's practically free money. 

I would also like to offer my tips on this journey as follows.

  1. Do not put the money you are not willing to lose and have an emotional connection to.
  2. Do not put all your savings in as this would be terrible for your sustenance in everyday life.
  3. Accept volatile prices that go and up and down daily but rather focus on the projection of 5,10, 15 years in terms of growth, that way your decision will be more are stable.
  4. Study the company and the investor documents to see where your money is going and to what use your hard cash is being put forward.
  5. If you do not agree with the companies moral or ethical standards then just leave it out.
  6. The trick is to figure out what companies will be worth a lot more than they are today and put your money into them. It's a mixture of being able to predict the future, collective human behaviour and economical trends.
  7. Not all stocks will rise over time so keeping up with the latest trends and company news is ideal to optimise your portfolio and cut down on losses.

 

Lastly, enjoy the process and keep an open-minded approach to the profits and losses of your stock portfolio. Please also keep in mind this is not financial advice but rather an article to expand awareness of the business structures around us. 

 

Kindly  

Afzal

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Photo by Visual Stories || Micheile on Unsplash

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