Many of my friends have invested in the stock market over the years, some have done well while others have been less fortunate, is it a good idea to put my extra cash in stock, why invest in stock?
Investing in the stock market has traditionally been how the affluent hedge inflation risks. The stock market has a history of continuous growth over time which cancels out the effects of the diminishing value of the currency, which is why many people choose to invest in stock.
Why invest in stock? Besides the inflation hedge aspect, your money can grow substantially if the stock you buy is of a highly successful company.
Many present-day billionaires and millionaires have begun their fortunes by risking their money on the stock of a new company.
Conservative investors can also enjoy the benefits of stock ownership without incurring too much risk by investing in stocks such as electrical utilities or food producers. Also, many companies have bonds that can be converted into stock called convertible debentures, which could also be an appropriate investment for conservative investors.
The advantage of investing in stock versus other investments, besides the prospect of capital appreciation, has to do with the wide variety of businesses that have stock publicly traded. You can have a diversified stock portfolio with selected stocks which can outperform the general market if you select your stocks in industries that are in the process of rapid growth.
In addition, many of the more established stocks pay out a dividend quarterly, which can also provide the stockholder with an income. If you plan to invest in a stock, it would be prudent to do some preliminary research on several stocks in the same industry you plan to invest in before buying. Investing in stocks can be risky depending on the company, so be aware of this before making a decision on what stock to buy.