Why Invest in Stocks?

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Why Invest in Stocks?

Stocks are but one of many possible ways to invest your hard-earned money. Why choose stocks instead of other options, such as bonds, rare coins, or antique sports cars? Quite simply, the reason that savvy investors invest in stocks is that they provide the highest potential returns. And over the long term, no other type of investment tends to perform better.

Things To Know

  • Savvy investors invest in stocks because they provide the highest potential returns.

The risks of stocks

On the downside, stocks tend to be the most volatile investments. This means that the value of stocks can drop in the short term. Sometimes stock prices may even fall for a protracted period. For instance, the 10-year return for the S&P 500 was slightly negative as recently as late 2018. Bad luck or bad timing can easily sink your returns, but you can minimize this by taking a long-term investing approach.

There’s also no guarantee you will actually realize any sort of positive return. If you have the misfortune of consistently picking stocks that decline in value, you can lose money, even over the long term!

You can live with the risk and even profit from it

Of course, by educating yourself and using the knowledge found in investing courses, you can make the risk acceptable relative to your expected reward. You can learn to pick the right businesses to own and spot the ones to avoid. Again, this effort is well worth it, because over the long haul, your money can work harder for you in equities than in just about any other investment.