Out of so many investment products such as property, stock, precious material, commodities and more, stock tends to be the most common investment choice for most investors. Its commonality does come with some reasons and the following are 11 reason of investing in stock.
- Minimal Outlay - One does not require a lot of capital to purchase shares. Of cause, this will depend on the rules determined by the securities commission of respective countries. For example, in United States, minimal purchase of share can be 1 unit. If a share is only worth $1 , you can invest just with $1 before including the brokerage charges and commission. While some other countries like Malaysia, the minimal purchase of share is 100 unit, but the stock price in the Malaysia Stock market are relatively cheap. Anyhow, most of the securities commission will make the minimal outlay affordable by most investors.
- Liquidity - Investments in shares are extremely liquid. One can sell shares and receive the proceeds in a matter of days. This is rarely possible in several other investment alternatives like properties.
- Decisions can be changed - Decisions made are not irrevocable. If one purchases real estate, it would be difficult to reverse it and sell in a hurry without incurring a loss. Shares can be sold easily and freely in the stock exchange as and when one desires.
- Hedge against inflation - Shares are a tremendous hedge against inflation. The real rate of inflation is normally higher than the declared rate of inflation by the government. Furthermore, the rate of inflation is higher than the interest received on bank deposits and other forms of savings or investment. Only shares have consistently yielded income and growth, over a period of time, that is far in excess of the rate of inflation.
- Safety - Unless one sinks one's money in an absolute dunderhead of a company - a lemon, one's investment is reasonably safe. And some are safer than the others. One will not lose all the money if the money are invested in good, sound companies.
- Wide Options - Thousands of companies operating in different markets and diverse industries are quoted on the stock exchanges. With globalization, it is never that easy before to purchase share in other countries or regions now. An investor can diversify their portfolio not only to different industries in his country , but to different geographical location on other countries and regions.
- Tax Advantage - In some countries, capital gain tax is not taxable.There are also some countries that does not tax on dividend income. However, those country that tax dividend income will allow the investors to pay less tax on their income tax.
- Collateral Facility - Several banks and other financial institutions lend money to individuals on pledging shares as collateral. This is extremely useful if the loan is required for a short term and one does not wish to part with the asset.
- Ownership of a large enterprise - The ownership of a share gives the holdera part ownerships in the company. Although he might not able to change the policy and strategy of the companies by himself, but he has right to vote , question the directors during annual general meetings.
- The Game - Above all, investing in shares is a game. It is thrilling to watch the performance of the company one has invested in and the movement of stock price. It is addictive to the extent that after one has purchased a share, it is difficult not to check its price everyday. Hours can be spent on deciding whether to sell or to buy more.And the result is the realization of the decision - whether it is correct or not. It is exciting and fun.