There are a few of us who has ever adopted a planned and systematic approach to investing. The approach has always been largely ad hoc in nature. For instance, most of us put an alarm to wake us up in the month of March every year so that we can primarily save taxes and consequently make good investments so that it give us a tax break and would help us to reduce our tax liability. So let us see why one should invest in stock market.
There are some good reasons you should continue to invest in stocks:
The stock market doesn’t care about you
The stock market doesn’t care about you or your plans. It doesn’t have any agenda and could care less about yours.Despite what you may have heard on late-night infomercials or read in an unsolicited e-mail, there are no magic formulas for investing success.There are no secrets of the rich and famous; no secret passwords or handshakes.
In truth, there is nothing standing between you and successful investing, but some hard work and understanding the fundamentals of investing.While institutional investors have an advantage (more resources, more fulltime professionals), you still have access to all the information you need to be successful.
See Also: Stock Market In India
Stocks are poised for growth
The truth is no one knows with certainty when the market is going to move up or down.We can be guided by what has happened in the past and what logic tells us about today’s markets.Historically, stocks have rebounded following a recession or a bear market. The rebound may have been swift or slow, but it has always happened.
Stocks offer the potential for current income and long-term growth
One of the major benefits of owning stocks is their ability to produce current income (dividends) and long-term growth. When the economy rebounds, some companies will be in better financial condition than others. Mature companies with established markets may be in an enviable financial position.
As is often the case, companies providing products or services to businesses may experience rapid growth. Companies that have curtailed spending during the economic crisis will play catch-up, scrambling to capture market share or protect what they still have.
You Can Trade or Buy and Hold Stocks
Stocks offer traders and investors opportunities for success. This is not unique among securities, but it does make equities a versatile investment.Long-term investors (buy and hold) have found opportunities for success in picking good companies and riding with them until something changes the investor’s opinion of the company or its stocks.
Here are some thoughts on some specific categories of investments:
Cash isn't much of an investment--but it's what you actually need when you're ready to spend. Your emergency fund should be in cash (money market fund, high-rate savings account, t-bills, etc.).
Short-term bonds rarely yield much more than cash--but they're a good choice for money that you're going to need at some particular time in the near future. (For example, as your kid approaches high school, it might make sense to start moving his college savings into short-term bonds with maturity dates that match the tuition bills.)
Long-term bonds are very vulnerable to inflation, but can be a great investment when the coupon is high enough to provide a good return over whatever inflation turns out to be.
Inflation-adjusted bonds are an excellent investment, except when the after-inflation return is very low--which it had been for the past several years. Happily, the return on TIPS has surged in just the past few weeks, making these an investment well worth considering.
Gold is a store of value. There's good reason to hope that your investment in gold will maintain its value, but little reason to hope that it will grow in value. (Although the gold price will go up if there's inflation--and just staying even with inflation can be tough with other investments. Still, don't expect a return from gold that will fund any of those wants on your list.)
Stocks are the classic investment. Prices are down right now, but the looming recession will probably mean that profits will be low as well. If you've got a 10-year time horizon, stocks are a good choice.
Real estate is another classic investment, but be careful not to delude yourself. As an investment, your home is worth whatever it lets you avoid paying in rent. Properties that you rent out are definitely investments--but being a landlord is as much like having a second job as it is like owning an investment like stocks or bonds.
There are many advantages of financial planning. When you create and adhere to a financial plan, it enables you to mitigate the adverse effects of rising cost of living. The cost of living has risen significantly over the years. Cost of living rises because of inflation. Our aspirations are ever increasing with the increase in consumerism. Today, we all aspire for a higher standard of living that encompasses more and better life style products. So, people invest in the Indian stock market to reap better benefits. Financial Planning is a step-by-step process and involves identifying your goals and placing a time frame and money value to them. It also involves in estimating your earnings/receipts during your lifetime.
It is really important to understand your investment risk personality and then investing in the market taking into account your risk personality. It is also very important to review your financial plan. To reap greater benefits and to lead a good lifestyle is the main reason why one should invest in the stock market.
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