Although the market is currently hovering around all-time highs, only half of all Americans own stock. So why should you start investing right now?
There are plenty of reasons why people don’t invest.
Skepticism from the last recession remains high. People are intimidated by the idea of crowded trading floors and screaming traders. Most of all, there is a general lack of understanding about how to get your investment portfolio started.
But investing in the stock market is actually quite easy. What’s more, it’s actually a very sensible way to secure your financial future.
The good thing is it’s never too late to start investing, but here are five reasons why you should probably start sooner rather than later.
1. The Stock Market Doesn’t Discriminate
Anyone can invest in the stock market. Honestly, anyone.
All you need is a small bit of money to start your investment portfolio (some stocks cost less than $20) and a very basic understanding of how the stock market works.
With those two simple things, you could be on your way to growing your long-term wealth in no time.
2. Your Investment Is Poised To Grow
Compound interest is, without a doubt, one of the most powerful wealth creation vehicles of all time. Even Einstein was in awe of its power!
But in order for it to work its magic, you have to give it time. Remember, compound interest is interest on interest (have we said interest enough?). That means that the longer money is subjected to compound interest, the more exponentially it will grow.
Put it this way—if you invest $1000 at a 10% interest rate, after the first year you’ll have $1100. But next year’s interest will be on your original investment ($1000) plus the interest you earned in the first year ($100). So instead of earning another $100 in interest, you’ll be earning $110.
With every year you have your money invested, the amount of interest you earn will grow too. Therefore, the earlier you start investing, the better.
3. Stocks Can Earn You Money Regularly
The main benefits of investing come from long-term growth, but some stock investments can also act as a source of regular income.
Shareholders earn capital gains from a rise in the stock’s price, and some companies also distribute dividends based on earnings to their shareholders at regular intervals. Coca-Cola, for example, pays out a 3% dividend per quarter. This means that for every dollar you have invested in Coca-Cola shares, you’ll be paid 3% a year in cash.
4. You Don’t Have To Pick Individual Stocks
If you don’t feel confident enough to pick individual stocks, you can always invest in an index fund that tracks the whole stock market.
This kind of passive investing is far less risky than individual securities and doesn’t require any lengthy research or interest in a businesses operations.
5. Not Investing Could Be More Of A Risk
Not investing is actually a financial risk in itself.
By not investing, your money is not earning any interest and your wealth isn’t growing. In fact, the current value of your money is also being eaten away at by inflation. This means that the cash you have now, even if it’s in the bank, won’t be worth as much in a years time.
money that’s invested in the market, however, is somewhat protected from inflation by the growth it experiences. Despite the daily fluctuations of the stock market, a strong portfolio has been proven to multiply your original investment over time.
Investing can help you save for retirement, a new house, college tuition, starting a business, and any other financial goals you might have.
So there you have it!
Investing doesn’t have to be some convoluted and inaccessible system reserved for the high-powered suits of Wall Street. In fact, investing is actually a very astute way of making your extra cash work for you.
By investing money intelligently in different long-term stocks, all you need to do is sit back and watch your investments grow.