Why Should You Trade Stocks?

Why Should You Trade Stocks?

Stocks create great value of money in your investment portfolio. 

Investing in stocks of diverse companies helps to build your savings, secure money from inflation and taxes, and maximize income. 

But before investing in stocks, traders (investors) must be aware of the risks in the stock market. Like any other investment plan, it helps to understand the risk and return relation and your ability to take the risk.
 


 

Brief overview of the stock market

Stock trading gives you the proprietorship rights of the company. Traders buy stocks when the stock price is comparatively less and sell them off when the stocks price gets higher. Invest in profitable stocks and earn profits by using different fundamental and technical analyses. 
 

Highlight popular stocks

There is nothing called a perfect stock. Stocks for beginners and experienced traders always will be different. 

Here are top 10 companies profiles for investments in January 2022 are:

  • DocuSign, Inc. (NASDAQ:DOCU)
     
  • Coinbase Global, Inc. (NASDAQ:COIN)
     
  • Twilio Inc. (NYSE:TWLO)
     
  • The Walt Disney Company (NYSE:DIS)
     
  • DigitalOcean Holdings, Inc. (NYSE:DOCN)
     
  • NVIDIA Corporation (NASDAQ:NVDA)
     
  • Upstart Holdings, Inc. (NASDAQ:UPST)
     
  • Target Corporation (NYSE:TGT)
     
  • The Trade Desk, Inc. (NASDAQ:TTD)
     
  • Unity Software Inc. (NYSE:U)
     



Advantages & Disadvantages

The Stock Market has given great investment returns to investors over the time period, but it also faces downfall. 

Let's focus on some of the advantages & disadvantages:

Advantages:

  • Growing economy
    With economic growth, corporate earnings also increase. It's because economical growth creates new job sectors, income, and revenue.
     
  • Inflation
    Stocks have an annual return of 10%. That's much more acceptable than the average annual inflation rate.
     
  • Easy to purchase
    You can purchase the stock of different companies all by yourself or through financial advisors or brokers . They have to open a Demat account. Sometimes brokers don't charge any commission. 
     
  • Make money in two ways
    Investors aim to purchase at a low price then sell at a high price. Invest in fast-growing companies that increase the value, which is attractive to day traders and buy-and-hold investors.
    Some people take advantage of short-term trending when the stock price rises, it's time to sell off the stocks. And others want the company's earnings and stock price to grow higher over time. Usually, they like long-term investments.

     
  • Easy to sell
    The stock market has no restrictions in selling stock, trades can sell the stocks whenever you want to. 
     

Disadvantages:

  • Risk
    Risk of losing the full investment. If a company performs poorly it's stock value will fall, the investors will sell the stocks off and the stock price will drop more. When you sell, you will lose your initial investment.
     
  • Stockholders paid last
    When a company faces bankruptcy, the remaining assets are distributed among the preferred stockholders, bondholders, or creditors at the very first. Meanwhile, stockholders get paid at last.
     
  • Time
    Before investing in stocks, one must analyze each company to determine if it's profitable or not. Have to go through financial statements, companies semi-annual and annual reports and follow up the company's developments in the different media. 
     
  • Emotional roller coaster
    The Stock rates jump up and down within seconds. It's full of uncertainty.
     
  • Professional competition

Expert traders have good knowledge about investment plans. Knowledge of sophisticated trading tools, financial models, and computer systems.
Beginners have to be very focused and spend a lot of time acquiring skills like them.

 

enlightenedSimilar Topic: What Is Stock Trading And How Does It Work?


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Comparison with Forex & Crypto

The Stock Market trades in stocks, which are the units of proprietorship in a company, and forex or foreign exchange is a marketplace to buy and sell currencies.

On the other hand, by investing in cryptocurrency you purchase the coins themselves. It depends on the trading style and preferences.

If someone wishes to make a quick profit, then forex is likely the best way to go. And if you have enough patience and the willingness to go through heavy research and make long-term investments, stocks are the best.

Cryptocurrency is traded directly between the buyer and seller, trades among individuals. Unlike the formalized stock exchange system, where shocks are traded through a third party known as brokers or brokerage firms.


Investing in crypto assets is more risky than both Stock Market and Forex, and it's banned and illegal in some countries but potentially extremely profitable.

I will stop here even if there is a LOT more to discuss! A LOT! But this is not an ebook and is already a very long post!
At least it gave you a few useful tips, I hope. My mission is to help you, and I really hope I just did that!

 

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