The Advantages and Disadvantages Of Investing In Shares

By investing in shares in a public business, you receive a share of the ownership of that business. You could receive a very high return, but you will also risk losing money if the business fails.

If you are thinking of investing in shares, here are some helpful advantages and disadvantages of this practice.

 

Advantages

• You can increase your wealth. In most cases, the price of stocks increases and so you will make a profit when you come to sell them.
• The returns for stocks are usually much higher in the long-term than other forms of investment, like bonds.
• Some stocks make payments to shareholders, usually a portion of the profits. These dividends are especially welcome if you wish to buy more stocks or to protect you in the case that your shares drop in value. However, they can also be used as a form of income.
• As a shareholder in the business, you may get a say on the policies and shareholder issues.
• It’s very easy to invest. It is common for people to enter the stock market online. There are also a number of facilities available that offer you information and advice on the market and generally make the whole process much easier. Look online for brokerage houses that find the best broker deals as they’ve currently got some great promo codes. However, despite the fact there are many helpful services, it is important that investors do plenty of homework themselves. You should be kept up to date with economic news, reading financial blogs and monitoring stock prices.

Disadvantages

• There is always the risk that the business you have invested in goes bankrupt and your shares, therefore, will have no worth.
• Stock prices can significantly increase and decrease suddenly.
• Buying shares is not an investment that guarantees a return.
• The price of your shares may fall when you decide to sell them, and so you will get less money than you paid for them.
• It is a very unpredictable practice and so it is difficult to predict and manage your finances.

Is it right for you?

So, is buying shares the right investment for you? Because of the unpredictable nature of shares, you must have a decent amount of capital and a secure and regular income. Investing in shares is not a get rich quick scheme. It is a long-term investment so you must be prepared to stick with it for a while. Although the internet has made it easier to invest in shares, you should not expect all the hard work to be done for you. You will need to dedicate a certain amount of time into educating yourself.

Conclusion

Investing in shares can be both rewarding and risky. Although it gives you the opportunity to make some serious cash in the long-term, there will always be the risk that the company goes bust, or your shares decrease in value. It is important to do plenty of research into investing shares before you start to trade.

Image: Flickr.com