Why invest in the stock market? What are your reasons? Isn’t it a question worth needing an answer? Before investing, it is vital that you ask this question to yourself because having clear-cut reasons or a purpose is vital to your success. If you are not working towards a goal, investing will be hard and dangerous that’s why you need to establish your reasons so that you’ll have a picture of what will your investments be. I’ll outline below some of the most common reasons why people invest in the stock market.
Why invest in the stock market?
Retirement
People invest because they are unsure of the times ahead. No one knows what will happen in the coming decades and with the ongoing inflation that is happening in our country, people are forced to plan their own retirement. The more years between today and your retirement, the more your money need to develop. To do this, we invest our money in the stock market. Young investors who wants to plan their retirement early take on more risks but as you grow old, the more risk contrary you will be. That’s why older investors planning for their retirement sometimes use guaranteed investments like debt securities which have lower returns compared to the stock market.
Financial Security
There are many ways why investing in the stock market can accomplish your financial goals. Investing can be used as a way to generate revenue to help you buy things that you need. Investors invest when they plan to buy on something; like a new car or house. Or perhaps, to travel the world or put up a small business. To do this, we blend short-term and long-term investments. So if you want to buy a car, then you’ll want to invest for the long-term. But if you want to buy smaller things like a new cellphone or a tablet PC, then you may want to find short-term investments that pay dividends. To effectively accomplish your financial goals, one important thing is to set it first so that the money that you plan on investing will be well spent on that particular goal and not in some urgent things that will come from time to time.
Now that you established your reasons for investing, let us identify the reason why not to do it.
Debts
The number one reason why you shouldn’t invest is when you have a lot of debt that you need to pay first. Examples of debt are credit card debts, mortgage, personal loans, car loans, etc. The reason for this is based on just simple calculations. Imagine you have a 100,000.00 peso loan with 9% interest and one day you received a bonus amounting to 100,000.00 pesos. Should you pay or invest? The answer is pay the debt. Reason being is that if you invest the money, it should make a 9% or greater returns to make it worthy. If you pay your debt first, you’ll avoid big losses in interests and you’ll find better returns in your investments if you’re not so much worrying about your debt.
Lack of knowledge
Another reason why you should not invest in the stock market is if you don’t have knowledge about it. Putting money in it without comprehending how it works is a surefire way to lose money. To learn about the stock market, you have to read and study about it first There are some websites that offer expert stock analysis like PinoyInvestor that helps beginner investors make intelligent decisions. Also, PinoyInvestor members can get access to PinoyInvestor Academy for FREE wherein you can find all the necessary reading materials and guides to start learning the Philippine stock market. Bottom-line is, if you want to start investing in the stock market, you should put some effort into studying it first.
In conclusion, the reasons for investing should be coupled with a proper plan and goal as investing with no aims will likely result in losses or diminished returns. Your reasons may change as you go through along your life so that’s why your goals should be adjusted depending on the changes in conditions. Always remind yourself of your reasons regularly to see how you as an investor has advanced.
Happy investing!