Why Invest in Stocks: 7 Reasons for Putting Your Money into Stocks

 Many people are unsure about whether they should invest their hard earned money into stocks. Click here for reasons why you should invest in stocks.

 Do you run the risk of outliving your money?

Research shows that today’s millennials are missing out on as much as $3.3 million in retirement savings by avoiding the stock market.

You may think choosing to invest in the stock market is risky, but you should be scared not to.

The stock market can be frightening and unforgiving for beginners. So, why invest in stocks? Keep reading to find out!

Why Invest in Stocks?

While there are many ways to invest your money, stocks provide the highest potential return.

You want your money to perform well for the long haul. Here are six reasons you should consider stocks as a long-term investment strategy.

1. Build Your Wealth

We all want to get rich.

You don’t have to invest in the next big thing to make money by investing. In fact, the average stock market return is sitting at 10% per year.
 
You also don’t have to invest thousands of dollars to grow your wealth. Try setting aside a few dollars a day. Can you give up that morning stop for coffee at your local cafe? That’s a good place to start!

Just remember that there is no way to guarantee that your stocks will perform well. If you’re just getting your feet wet, start small and choose your moves wisely. 
If you’re nervous, stay on top of market news or consult with a financial advisor before getting started.

2. Own Part of a Business

When you buy shares of stock, you are buying small pieces of a business. 

If you own enough of a company, you can have a seat at the table. You are directly involved in decisions that affect the life of the company over time.

You can also invest to support entrepreneurs as they create new jobs and products. As an initial investor, you are a part of a business venture from the beginning. You help them turn into a successful, profitable company that will give you a strong return on your investment. 

3. Pad Your Retirement

The average retirement account pays out an income of less than $400 per month.

Yikes. Not many people can survive on that low of an income.

Sure, social security will probably still be around, but in what form? Even in the current economy, social security benefits aren’t much to live on. It’s best to not consider social security when retirement planning.

You only get to retire once, so set yourself up for a comfortable life by investing in the stock market. 

4. Diversify Your Investments

You’ve probably heard the saying, “don’t put all your eggs in one basket.” This is especially true when investing.

There are times when the stock market is down but the bond market is doing well, or conversely the other way around. Spread your money among stocks, accounts, CDs, and bonds to gain better control of your investments.

Diversification is the lowest-risk way to gain the highest return. This is encouraged if you are just starting out and looking for an alternative to a savings account.
 
5. Get Ahead of Inflation

Inflation is unavoidable.

Inflation is the rate that prices in a given economy raise over time. As prices rise, your buying power drops. In simple terms, you can buy less with the same amount of money.

The only way to beat it is to make more money than inflation takes away.

Earlier, we discussed the average annualized return rate of 10%. This is much higher than the 3.2% average annualized inflation rate.

This means you can invest in and hold onto stocks even if the value drops temporarily. You won’t need to worry as much about the risk. Your money will go further if you’re gaining a return.

6. It’s Easy to Sell

If you’re interested in making big purchases, investing in stock is more convenient than investing in materials or real estate. 

If you need cash quickly, you can always turn to your stocks. The term “liquid stock” refers to stock that has a high volume of trade. This stock is easily sold.
When you invest, you can turn shares of stock into cash quickly with relatively low transaction costs.

Of course, if you take your money out in a hurry, you may be forced to take a loss. There is always a risk, but increased risk equals increased reward!

7. Create a New Source of Income

Warren Buffet once said that it takes three sources of income to get rich. He purchased his first stock at 11 years old.

The stock market allows you to create a source of passive income. If you start investing and find that you’re good at it, you can turn it into a second source of income. 

All you have to do is invest in quality stock and sit back and let the magic happen. The value you invest now has a chance to compound and grow without you ever adding to it! 

Save for Your Future
 
Now that you know why to invest in stocks, start small and buy a few shares. After all, there isn’t a reason not to.

Visit an investment manager to begin a target date fund based on your retirement age. Or check out a few of the investment apps that are available now. Most of these apps are free and will help you choose where to place your investment, so you don’t have to make the decision alone.

Whatever you do, don’t sit on the sidelines. Investing in the stock market may seem risky, but it’s less risky than doing nothing! If you don’t save now, you run the risk of outliving your savings in retirement.

Interested in other smart strategies to make money? Check out our business and trading section for more tips, tricks, and ideas to live a more lucrative lifestyle.
 

 

 
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