Stocks or Cash?
Some financial advisors suggest that you should immediately invest whatever savings you manage to build up into stocks. But the stock market tends to fluctuate dramatically, depending on what’s happening in the economy and the world at this particular time. Maybe you’ll have a hunch about which stocks are poised to do well, but that might be wrong. Or maybe a broker will convince you that their choices are superior. But how do you know for sure?
Advantages of stock
1. Stocks are very reliable.
If you hold onto them for an extended period, they’ll generally increase in value. Companies are constantly trying to find the cheapest and most efficient ways of doing things. The more efficient they are, the more money they make and the more valuable their shares become.
2. Stocks offer you the benefit of diversification.
According to Jordan Sudberg, if you own a small number of stock options, you’re less likely to lose money than if you had invested in one or two stocks that have performed poorly. You can also invest your money in a mutual fund through your investment company or bank that follows a particular plan.
3. Stocks are the best way to make a fast buck.
Stocks might be your ticket to success if you’re looking for an easy profit. You can sell stocks you’ve bought for less than they’re worth or even sell them short. That’s true only if the market is moving in your direction, though: If you sell your stock for $5 when its market value is $6, you’ll lose money rather than make any. If you are interested in investing in gold, you can read more about it here.
4. Stocks are worth more than cash.
If you own a marketplace, you earn the difference in value between two stock prices. If your stock increases in value by $1.00 and someone offers to buy it for $2.00, you make $1.00. Invest now in a PSAC stock for financial freedom.
5. Stocks are liquid
easy to convert into cash if you need money quickly: When you want your money back, sell your stocks to the broker or person from whom you bought them.
If you own bonds and mutual funds, you may have to wait for a specified period before being able to sell the bonds and redeem your investment with the money.
Disadvantages of Stock.
1. The stock market can be unpredictable:
Stock values go up and down without warning, depending on how well the companies whose stocks you’ve bought are faring in their industry. If a company’s sales or profits fall below expectations, its stock value will drop.
2. You may have to pay taxes on your dividends.
If you sell stocks, you might be subject to capital gains taxes. And if you were to change your mind and decide not to sell them, you might owe a tax on the difference in value between what your original investment was worth and the price of your stocks.
3. You can lose more than your investment in stocks.
According to Jordan Sudberg, if the company goes bankrupt, so do its shares. And if your company offers a generous employee stock purchase plan, it might not always be very generous when you try to turn it into cash at retirement time.
The stock market can be a great place to make some money. But to make that money, you must know what you’re doing. You have to study the market closely and understand your options. And remember, an investment is only worth as much as you pay. If you invest in the stock market without understanding what you are getting into, it may cost you more than it gives back.