Advantages and Disadvantages of Stock Investment

Advantages and Disadvantages of Stock Investment

Investing is quite a trend in today’s life and almost everyone knows about investments and uses the money for investing. Investing also means that you put your money and let them work for you.  People are interested to invest their money in order to gain profits since the future is unpredictable and so are their financial situations. There are so many choices to invest and the popular one is stock investment. Stock market is one of the potential places to invest money. It may offer great gains as well as losses. Yet, if an investor can manage the stocks, there are many advantages which can be obtained such as secure the financial position and also earn money.

The main benefits of investing in stock market is the chance to get more money. Investing in a company that is stable and growing can give more profits to the investors. Stocks offer two kinds of benefits, capital gains and dividends. Capital gain is the appreciation of the stock’s value when the company becomes more valuable and so is the ownership interest represent by each share of stock. Dividend is the excess periodic profit distributed to shareholders when the company earns more profit which more than it requires to support its maintenance and growth. In addition, stocks offer very high returns compared to other investments. Stocks are also liquid type of investment because they can be sold and bought quickly at fine price.

Building wealth through stock market can be done through multiple stock investments. It means that investor can put their money to different types of products. Investing in various sectors of economy may result in a profit even though other investment products lose value. This way, the investors can prevent from losing their money compared to those who put all their money in one product only.

Purchasing shares of stocks means that investors are taking a part of the ownership in the company. It means that each shareholder is the partial owner of that business.  Shareholders have the rights to vote on corporate board members and certain business decisions. For the passive stockholders, they are offered limited legal liability.

On the other hand, stock investment may also give disadvantages for the investors. Shareholders are the last to get paid which means that they get the remaining money after all the employees, taxes, and other company’s necessities have been paid. Moreover, the shareholders may get very limited information about the company’s book. Most of them do not even know about the company itself which make them often confused in the decision-making investment.

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