A lot of people ask themselves, why invest in the stock market? To a large majority of the population, playing the stock market is another avenue to accumulate more wealth. Instead of parking their hard earned money in the bank where the interest rate is close to zero, it makes more sense for retail investors and traders to place their money into the stock market where the returns can be significantly larger.
Have you asked yourself, why invest in low interest? How can I make my money work harder for me?
Here are just a few reasons why trading stocks is such an attractive proposition for many:
1. Fast track to wealth.
The stereotype that is associated with stock trading is that it lures people in with the promise of instant wealth. Once someone gets in, if unprepared they are often overwhelmed with greed and tend to make emotionally charged decisions. This can lead to devastating results, ruining any chance at success all too soon. Alternatively, if you go in with the right mentality and education, taking a loss is much more unlikely. The trick to successful stock trading is careful risk management and making calculated moves. Why invest in stocks if the risk is too great? The fact is, if you spend the time to learn and understand how the market works, it can truly propel you towards the level of success you desire.
2. Preparing for retirement
Trading stocks, depending on your style of trading can incrementally build wealth to prepare you for retirement. If you choose to take a conservative approach and trade a diversified portfolio, reinvesting your profits, you will grow your wealth slowly but surely over time. This will provide you with ample money for you to use once you have stopped working. If you leave your money in the stock market, you will be able to collect passive income in the form of dividends at the end of each financial quarter. A 5% annual dividend on a $100,000 investment will yield you $5000 a year, not bad for a passive income stream!
3. Financial Education
When you decide to invest in stocks, you will be forced to teach yourself about risk management, interest rates, macroeconomic trends as well as discipline. All these qualities and skills will not only sculpt you into a better trader, but also ingrain in you useful financial knowledge that can serve you beyond stock trading.
These are just some of the reasons why you should trade stocks. Naturally there is an element of risk involved, trading stocks has to be treated seriously just as running any business should. But with careful education and proper procedures, trading the stock market can be quite lucrative.