One of the secrets of the wealthy and successful is that they never keep their money sleeping in a bank somewhere. Unlike most people, they always let their money work for them by investing in businesses, properties, or stocks of companies.
Indeed, there are many reasons why you should invest in the stock market – here are just some of them.
You can beat inflation
Inflation is one of the biggest problems in our economy. With inflation, the purchasing power of money decreases over time, which means that it takes more and more money to buy products and services as time goes by.
By investing in the stock market, you can beat inflation because you are growing with the economy. If the economy is good, your shares will be worth a higher value. If the economy is down, your shares will have a lower value as well, but most markets constantly go through highs and lows anyway.
Meanwhile, if you invest in a bank, not only will your money not grow with the economy, you’ll also lose out on inflation. For example, $100 in 1999 didn’t have the same value as $100 in 2019. If you had kept your $100 in a bank, 20 years later and it couldn’t possibly be worth more $200, even if you had kept it in a bank that offers the highest interest rates. However, if you invested it in the stock market, your $100 would be worth more than you think now.
You can grow your wealth exponentially
Investing in the stock market can give you high returns, much higher than you would get in any other market. That’s because, in the stock market, your capital investment earns exponentially and not linearly.
For example, you decide to invest $1000 in the stock market today. At an average rate of, say, 5% per year, your $1000 will become $1050 the first year, $1,102.5 the second year, $1,157.625 the third year, and so on.
The average stock market return is roughly 10% per year, which means that, barring any major downtrends, you can double your money in about 10 years’ time. Where else can you passively get that kind of return than in the stock market?
You can diversify your investments
Last but not least, it’s never good to keep all your eggs in just one basket. By investing in the stock market, you can invest your stocks in different companies, and even different kinds of investments.
If you’re a risk-taker, you can buy shares from various companies, ranging from small, growing companies called penny stocks, or big companies called blue-chip stocks. You can also invest in high-performing mutual funds which tend to be safer than individual stocks. There are also various kinds of mutual funds, depending on your risk appetite and personal preferences.