Why invest in stocks?
Why invest in stocks?
A true investor always seeks the investment with the highest potential return. And over the long-term, stocks have outperformed all the other financial asset classes.
Below, we summarize the reasons to invest in stocks:
- Outrun Inflation: Inflation is a continuous rise in the prices of good and services. Inflation tends to eat your savings and the only way to beat inflation is to make a higher return on your money. The compounding returns on stocks is one of the best ways to stay ahead of inflation. Over the last 10 years, the Nifty has given annual returns of 16.7% compared to the 7% average inflation rate.
- Higher Returns: As shown by the above graph stock market has outperformed all the other asset class over the long-term. As the economy grows, so the company and therefore the stocks return also grows.
- Dividend Payments: When a company shares its earning to stockholders it is called a dividend. By way of dividend, the company ensures a consistent return to the shareholders.
- Capital Increase: One of the major reasons to invest in stock markets is to build your wealth. Markets and the individual companies have their ups and down but over the time the stock markets tend to rise.
- Diversified Portfolio: By diversifying your investments into stocks, bond and money market instruments you can decrease your risk and protect yourself from the volatility of each asset class.
