Why you should invest in the stock market

When it comes to where your money goes, some people might say investing in stocks is the way to go. But why is that? Why would you consider investing in stocks? The stock market fluctuates A LOT and you might wonder if you’re going to lose out on money. Well, you will if you don’t avoid the pitfalls, but if you do watch for this, it’s actually a super remunerative form of making long-term income. This article will discuss why you should invest in stocks and the power of compound interest on these stocks.

Saving for retirement and other goals

One of the main reasons why people invest in stocks is for the future. Stocks often don’t really have a huge amount of growth, but over time, you’ll be able to accrue a ton of money.

You can use it for virtually anything. A lot of people like to use it for trips, college for kids, retirement, and the like. If you’re considering retiring in another country for the rest of your life, you can do so investing in stocks.

Now, here’s the cool thing about stocks. It’s the following:

• You don’t have to invest a lot right away

• It’s a good beginning to saving money

• You’ll have returns that grow bigger and bigger

• As you get more financially stable you can put a whole lot more money in, and after time you’ll have a lot more

Have you ever wanted to be a millionaire? Well, lots of times, you can do that by putting it into stocks. Typically, you’ll be getting a 10 percent annual return for what you put into this. For example, if you put two grand in right away and don’t even touch this, you’ll have almost 35 grand after 30 years. It might not be the end-all to money, but it’s a down payment.

If you don’t have this, take about 4 dollars each day for about 250 days per year. If you do that, it’s 1000 a year and if it’s got a 10 percent annual return, after 46 years it’ll grow to just about a million. That means, when you retire, you’ll be able to have a million dollars.

You can even up this to a whole lot more, and get a whole lot more back. If you’re considering whether or not you should put money in for the long term, do so now.

Compound interest explained

Right now, let’s discuss compound interest as a means to invest in a stock. What is it? Well, in essence, compound interest is the amount of accumulated interest on either a deposit or loan. It’s the interest that accumulates over time. It’s in essence interest on something with interest.

Loans or stocks that are grown with compound interest tend to grow at a much higher rate. The rate that this grows essentially is the frequency of how it’s compounded. With more compounding, the larger the interest. For example, if you have a stock worth 100 dollars that is compounded 10 percent at an annual rate, versus one that has 5 percent accrued semi-annually, it actually will grow faster with the lower rate because of how many times it’s compounded during that time.

Some of the rules in this include the following:

• It needs to have a lot of compounding periods over a period of time

• The more times it’s compounded over a year, the greater it will be

What this means for you in stocks is pretty simple: if you invest in a stock that does have compounding interest for many periods during the year, you’ll grow this a lot.

It does depend on what the rate of return is though.

Let’s take another example. Let’s say that you have 100 dollars to invest, with a certain rate of return on it. There are a few different numbers that you can go with on this:

• 5% which is the average rate of return on a certificate of deposit, or a government bond

• 10 percent which is what you get on an average stock return on the market, and it’s been that way since 1926

• 15% is what you might do if you want to invest and grow it quickly, and know which stocks will give you a bigger return over time

Remember, the number of times it’s compounded as well makes a huge difference as well. If your investment starts to earn you money, and the returns on this start to earn money, it grows with time. If you extend it over a period of time and begin to raise the return rate, it definitely can change a whole lot over time, and grow a whole lot more.

This is why over time, people will encourage those to invest young. If you invest maybe 5 percent at the age of 15, by 65 you’ll have just over 1100 dollars. But, let’s say at the age of 15 you invest 100 in some stocks, with a 20 percent increase over time, you can have almost a million dollars by the end of this.

Saving money is something that’s often seen as a hurdle in this day and age, but with the power of compound investment, it can make a world of a difference. If you do keep your nest egg afloat and invest it in the right stocks, you’ll be able to grow this, and for example, if you put 12 percent of your earnings for 10 years into stocks, and from there stop adding money, you’ll be able to grow this a whole lot more. It doesn’t take a ton of money to invest in a wise manner, but you have to do this over time. If you do it early on, you’ll be able to grow yourself a huge nest egg that will net you a lot of money.

The biggest growth

One thing that many people also don’t realize is that the stocks do have the biggest growth in the market. For example, if you look back on history at the performance of stocks, beginning from about 1926 onwards, the stocks were almost 10% annually consistently, with bonds being over five, and investments in the short term being about 3/5 percent. However, this was all before inflation. Of course, while it does have the dips and ascensions, often it does show growth in the long term.

Stocks are always growing, and if you notice that a stock is starting to possibly go out, you can always get out of it. For example, you simply look at the following:

• The overall growth

• News about the company associated with the stock

• The overall lifespan of a company like that

Actually, paying attention to the stocks might seem a bit silly, but often, if you do pay attention, you can take a look at stocks that are continuously growing, and ones that are not doing so hot. It’s easy to find ones that grow a whole lot faster than others, and once you do that, you can start to save for retirement.

They’re also super easy to maintain too, so if you don’t want to give it a ton of TLC, you can simply invest money, check on it, and grow the nest egg.

Riding out the market

Here’s the thing with stocks in the long term. If you’re not doing short-term investments, you’ll be able to ride it out. There are always ups and downs in the market, and sometimes it might be for a long period of time. For example, if you invest in some sort of media stock, and they end up creating flops or are struggling, it might take a dip, but if you’ve got it for the long term, you can totally ride it out. It might even take years, sometimes decades, to recover from this. For example, it can crash based on political events and such, but overall you will be able to grow this, no matter how long you stay in it.

Plus, you will come out in the black almost all the time. If you are worried about losses and such, it’s important to actually remember a few things:

• Losses are just something showcased on paper until you sell the investment

• Remind yourself you’re investing for the future

• If you save regularly and continuously invest, you’ll be adding to more

• Buying low might be a good thing if you know that you have a position of growth

Plus, let’s face it, most places will recover, and if you take advantage of buying low for the long-term, it could end up growing. Sometimes as well, the worst stock market trends lead to the best times. You know of the Great Depression, right? Well, the best returns in the stock market actually happened in May of 1932, and then the next one was in July of 1982, which was right in the middle of a terrible recession. So, don’t let the dips scare you. so what if a stock goes down for a few years? It might end up growing in a much bigger manner in the future.

Plus, it’s important to realize that not everything has to be put in stocks. Stocks offer the best growth, and they’re easy to maintain, but if you want to put something in a different form of investment to help grow it. You should look at the following to determine where to put it:

• Length of investments

• The risk

• The financial situation

• How much you’re willing to put in for a continuous time

In general, if you’re investing for a long time, you should have a more diverse array of stocks. You can put them in stocks in the US, foreign stocks, bonds, and then short-term investments. It’s really all up to you, but in general, you’ll need to be less conservative if you’re looking to grow stock.

Cautions

There are a couple of cautions we’re going to highlight before you begin investing in a stock. Stocks are a great thing, but you have to invest in them wisely, which is why it’s important to know some cautions associated with it:

• Don’t do nothing: just put a little bit in there each time, and it’ll be better than avoiding it

• Don’t start late: if you’re postponing it, you’ll end up it’ll become a huge pitfall and the earlier you begin, the better off you are

• Investing before paying off credit card debt: this is something that you should pay off since these tend to have a huge interest rate and it’ll be easier to invest if you have less money in other places

• Investing for a short term: only invest in this if you’re going to need this money for the short term

Ideally, you should make sure that you avoid all of these things, since all too often, they’re what can make it much harder for you to start with this. stocks grow if you put the money in them and let it grow. You will need to make sure that the money is in there for at least three to five years, but obviously longer. If you’re going to need the cash immediately, you should try to do a CD instead, since those are in the short term and they’re much safer for you if you’re going short term with the investments.

Ideally, the stock market is a scary place if you’re not actually looking at each side of the coin, it will become a bit of a problem. But, the stock market is one of the best ways to help grow money in a manner that will net you a lot in the long run. Investments, when you’re paying attention and doing it at a young age, continuously growing this, you’ll be able to create a giant nest egg for yourself and retire in a much better state than before. It’s amazing what you can do if you do put your mind to this, and investing can change your life forever.