Making money as you participate in stock trading is not easy. However, once you master the trade, you can unlock some secrets on how to maximize your earning potential. According to statistics, 95% of all stock traders fail. While there’s no research paper to back it up, you can easily find a number of sources online that’ll tell you that the success rate for stock trading is low.
For someone who hasn’t tried stock trading before, you might wonder: is investing in stocks worth it? The answer is YES.
The above statistics might scare you, but there’s actually a few good reasons why you should invest in stocks. Most people consider investing in stocks hoping that the value of their shares will go up in the next few years. For them, doing so is a solid asset allocation strategy. Also, there are those who believe investing in stocks is one good way to keep up with inflation. Regardless of the reason for doing so, investing in stocks is worth it because of the following reasons:
1. It has the highest potential for growth
For years, stocks have earned more than bonds and short-term investments in spite of frequent ups and downs. If you purchased stocks 10 years ago, you might be surprised to learn how much it’s worth today. Ever since stock trading began, stocks have an average return of almost 10% per year, compared to 5.4% from bonds and 3.5% from short-term investments before inflation.
Of course, the value has also gone down a number of times, but it only shows that stocks can give you the highest growth potential on a long-term basis. This makes it essential if you’re saving up for long-term goals or retirement. Take for example the Bunzl share price which started at £150 per share back in 1988 to £2,000 today – a more than 1,000% increase!
2. The market for stocks is huge
The stock market is huge. There are a lot of companies to invest in. You can either choose to invest in a globally established brand or go for a small startup in the hopes that their company grows. Regardless, there are a lot of options when you go investing in stocks.
3. Losing money while trading stocks isn’t that much of a threat
If you think losing money while you trade in the stock market poses the biggest threat, then you might be surprised to learn that it’s not. In fact, investing only in very safe investments, such as saving only enough money for retirement, will more likely expose you to risk of losing purchase power to inflation.
Even though investing has risks, not investing is also risky when you consider inflation. If you don’t have an investment that’ll grow in value, it’s highly likely that you won’t be able to afford things in the future.
While there are disadvantages in stock trading, it’s a lot better than just putting your money in a safe. And while the low success rate might look intimidating, the risks can be considered worth it.