Benefits of Investing in Stock Market – 3 Benefits Apart from Higher Returns
Introduction
There has been a drastic shift in stock market trading since the pandemic. In addition to company listings on the Nation Stock Exchange, retail investors have also grown from 33% in 2016 to 45% in 2021. It is interesting to note that this time the surge is mainly driven by first-time investors, including millennials. The rising awareness, the availability of the internet in the remotest of areas, social media, user-friendly apps, and the recent explosion of online knowledge are some reasons behind this development. In addition, with businesses suffering, jobs getting scarce, and more people working from home due to the lockdown, online stock market investing has become a popular alternative source of income. Investing in stocks offers many benefits, and we will examine them in detail in this article.
What are the benefits of investing in the stock market?
You’ve probably heard a lot of stories about how stock market investments are risky. It’s for this reason that our elders always chose safe investments with stable returns. In reality, if you understand your risk appetite, financial goals, and conduct proper research, then you can earn significant returns in the stock market. Also, you probably read that the rates on savings accounts and fixed deposit accounts have both decreased in the pandemic. Therefore, these are not suitable investments, if you want to combat rising prices and inflation. In addition to higher returns, investing in stocks can offer you the following benefits :
Liquidity
Liquidity is a primary concern for any investor. It is the ability of an asset to be converted into cash, when necessary. As with stocks, liquidity refers to how quickly a stock can be bought or sold on the stock market without affecting its price. Having a liquid stock also implies that there are enough buyers and sellers and that transactions can be made frequently and smoothly. Large-cap and mid-cap stocks, with high market capitalization, are fairly liquid. It is, thus, easier to buy and sell stocks of these companies.
Transparency
The SEBI (Stock Exchange Board of India) is responsible for regulating and monitoring the stock exchange, along with protecting investors’ rights. Transparency about the market allows investors to make informed decisions. The result is more certainty in trading and fewer fraudulent practices. Additionally, the regulations ensure that listed companies maintain a certain standard and follow the rules strictly.
Portfolio diversification
Different financial instruments are traded on a stock market, including shares, bonds, mutual funds, and more. Investors have a variety of options to choose from. Each instrument carries different risks and returns. Depending on your risk appetite and financial goals, you can combine different financial instruments to build a diversified portfolio. Diversification is a way to achieve maximum returns while minimizing your risk. You can also review your portfolio periodically and make adjustments in response to market changes.
In a nutshell, whether you are a beginner or an experienced investor, you should conduct thorough research, understand the basics, and only then, start investing in the stock market. With online investing available on mobile phones, trading is only a click away. You can create an account within minutes and begin trading. For queries or doubts, always consult an expert.