Why should you invest in the stock market

The Market has gone up so much in the last few months and you are thinking whether now is the time you should invest in the stock market. That is a very fair question. You are thinking you could wait for the market to come down a little bit and then invest at a cheaper price. But here is the problem, nobody knows where the market is going to be in a few months or a few years. There have been pundits predicting a market crash every year for the last 5 years. Sure, there were instances when the market went down and those pundits could have said “I told you so” but those mini crashes were quick and over with. To put that into perspective in the last 5 years the market has gone by over 50%.

Here are four reasons why you should invest in the stock

Your money in a savings account is losing value

This is usually a tough one for the savers to swallow. I am with you, I used to be there and still am sometimes. My fear of investing in the market was that I would lose it all. The $100 in my savings account would be $100 plus a little bit more as long as i kept it there and i didn’t have to worry about what the stock market did. If this is you then, inflation has been robbing you. The $100 from 2015 is only worth $91.08 today in 2020.

Inflation per Year

Low interest rates

This also affects the savers and is linked to saving your money in a savings account. The whole reason for keeping your money in a savings account was to get some interest on it but interest rates on savings accounts have steadily come down. Do you remember what the interest rate on your savings account was when you signed up for it? Mine was 1.75% APR which seemed like a pretty solid deal back then when inflation was also around that. Hey, at least I wasn’t losing money and my frugal living ways weren’t going to a waste. What’s the interest rate on that account now, you ask? It’s a tiny 0.15% APR.

Markets have historically gone up by 10% on a yearly basis

Should you expect this level of returns every year? No. There are going to be ups and downs in the market. If you are to invest in the market for the long term and don’t panic and sell when the market goes down, you should do well and make some money along. 10% yearly returns is the past performance but there is no guarantee that you can expect to see the same in the return, you might have to settle for less than that. If you are starting off with a tiny amount to begin with,10% is not going to be a lot of money but think of it like your regular 9-5 job. You work all year to get a 2-3% raise and it’s something we all look forward to but instead of it being 3%, it’s 10%.

Dividends

When you buy shares of a company you are a part owner of that company. Dividends is the distribution of profits to the owners or shareholders. The only purpose of people starting their own business to make money from it, buying shares of a dividend paying stock is the same as owning a business where you make money from it. This sounds like a great deal, doesn’t it? Hold on to that thought, there is obviously a catch. You have no control over the dividend policy of the company. They can increase the amount or decrease the amount and you will have no choice in the matter.

Conclusion

There are risks with investing money in the stock market but there is even more risk of losing out by not investing. Few things to be remember along the way be patient, be consistent and don’t panic.