Should I invest in stocks? (Beginner’s Guide)
Investing in the stock market is totally about making money, learning, and having fun for a long period.
Sometime, you will have a sufficient amount saved then you will think,“Now, I should maybe invest this someway.”
However you are fresh in the stock market, want to get back in it, or only want an update on why should I invest in stocks then this article is all for you.
Below we have discussed 4 main reasons why you should invest in stocks. Firstly, we begin with the major fact-based reasons to invest in stocks, after that we will change into some professional and personal reasons to invest.
- Invest in Stocks to Grow Your Money
This is the common reason to invest in stocks and is naturally at the basic of why people invest in stocks.
If all goes well, you can increase the money somewhere from 7 percent to 10 percent after each year for a long period.
If you spend $5,000 in the stock market and it increases approximately 7 percent each year, you will get that $5,000 into $10,000 in just 10 years.
This is a great amount of increase in money.
Imagine 10 years before you place $5,000 into a bank account, spent it in any stocks, did few trades, and after 10 years you have your $5,000 plus another extra $5,000 you got by investing.
Or, just think a longer-term case where you are equally a saver and also a smart investor. The picture you spend $5,000 of your money into the stock market each year for 15 years.
That’s $5,000 this year, an additional $5,000 next year, an additional $5,000 the year next of that and so on for 15 years.
Therefore in overall, you will have invested $75,000 in stocks over 15 years ($5,000 per year x 15 years).And now think you attain the equal average annual profits we mentioned above, 7 percent each year.
Therefore you have spent an entire of $75,000 over 15 years — now guess how much extra you will have in your account at the end of those 15 years.
You will have more than the $75,000 you invested over 15 years, this increase is because you have invested your money in stocks.
Outcome — by consistent investing, you can grow $5,000 each year into more than a $75,000 over 15 years.
Now, $75,000 is the money you directly spent every year. But the other $505,365 is cash you got by investing in stocks.
- Invest in Stocks because of its previous progress
Generally, stocks have inclined to increase over the previous 100 years.
Surely, there have been horrible pullbacks, crashes, and stages of wrong performance. However overall, stocks have shaped a stable line upwards after the global markets have grown.
For example, here’s the S&P 500 (which is a collection of 500 companies) from January, 1928 to 2019. Inclusive, stocks have inclined to increase over the last 100 years.
Although there are many ups and downs on the way, the stock market has usually inclined upwards. And if you invest in stocks and keep them for 20, 30, 40 or even 50 years, you could have made a great amount of money. However, only 1 single dollar invested in the stocks of minor companies (called as small-cap stocks) in 1926 could be valued at approximately $40,000 now!
A lot of people invest in stocks just because the chances are in their favor that specific time, the stock market will go up and increase their money.
- Invest in Stocks for the Power of Compounding
We showed you the influence of compounding an above also, but here we will discuss the main concept of Compounding:
If you make a decent stable amount on your money (nothing irrational, only a decent and stable return) over a long period (such as 25, 50, 60, or more years), that investment raises much greater than appears to be possible.
Let’s say, we investing just $5,000 per year for 15 years while getting a 7 percent return each year turned into over 505,365 dollars.
However just look for an even longer period.
Let’s guess you did that same approach (like investing only $5,000 per year and earning 7 percent returns each year) for 50 years, instead of only 15 years.
Then your consistent investment of just $5,000 will have increased to a surprising $1,684,550!
Yes, this is a reason why people generally call it “the power of compound invests.”
If you start investing early, save gradually, and invest wisely, your money can increase in really incredible ways over time.
- Invest in Stocks to Save for Retirement
A lot of people spend in their retirement accounts not only for the tax-exempt incomes, however because they want to have a fine good place for living after they retire.
You have even heard it from me before and I am saying it again:
If you start spending when you are young or just after you started earning, you can make a great quantity of wealth to your retirement.
Duty-free retirement accounts help increase the growth in your savings, as do consistent payments from your regular salary.
If you want to stop working at any point in life and don’t want to just depend on social security to be there to help you and your family, investing in stocks might be the best way to save for retirement.
- Invest in Stocks for Tax-Free Profits
The government provides several kinds of tax-free plans that allow you to legitimately stop giving taxes on your money.
Avoiding taxes might make a huge change in how much amount your investments produce over time.
And the higher the amount of money you invest and earn, the higher the good impact of not giving taxes.
However to get advantage from these tax-free accounts, you usually have to invest in stocks or other similar kinds of investments (such as, ETFs or mutual funds).
If you keep yourself away from the stock market, you are missing out on an enormous gift from the government: years and years of tax-free investment progress.
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