Despite the economy’s ups and downs, the stock market has consistently proven to be a good place to invest your disposable cash and save for your future (as long as you can withstand the ups and downs and plan for the long term). The popularity of online brokerages attests to the demand for stock accessibility in an increasingly DIY society.
But the stock market can be risky if you don’t know what you’re doing, so you might need a little push before taking the plunge. Whether you want to take on DIY investing or lean on a financial advisor, we’ll lay out the reasons you should consider investing in stocks.
You don’t have to suddenly become a CNBC addict or an expert on certain companies to invest in the stock market. If you have a 401(k) or you’ve had a 529 plan (an education savings plan), you have already taken part in America’s proven way for getting the best long-term growth out of your hard-earned cash.
Here are some reasons why you’ll want to consider stocks:
- Best Potential for Growth: Yes, the market has had its up and downs (especially in recent memory), but over time, you are poised to get more by investing in stocks than you would with corporate bonds, commodities, or treasury notes. From a historic standpoint, stocks have provided nearly 10% over the long term while U.S. Treasuries have given back just around 5%.
- Asset Allocation: The key to combatting the volatility of stocks is to control as much as you can by diversifying where you put your money. You may still want to have some bond holdings and other less risky options like a money market account, but you definitely don’t want to put all your money in any one place.
- Advantage of Time: The key to all this is thinking “long term.” If you’re nearing retirement age, you need to pull back on the riskier investment options. But if you have time on your side, you can likely withstand the riskier investments and ride the ups and downs that are inevitable. The hard truth of investing is that you can’t get big returns without taking risks.
The stock market has endured its fair share of ups and downs over the years, but, in fact, the benefits of investing haven’t changed. What has changed—or needs to change—is the investing public’s perception of the stock market and its associated risks. In addition to investing some of your available cash in a savings account, consider the reasons why stocks continue to be a viable investment and why you should invest in the stock market whether you’re a fledgling or a more-experienced investor.