Friday, 21 May 2021

Risks and Benefits of Investing in Stocks

On many occasions, we have seen important people generate great wealth and increase their wealth at an exponential level. But, as we have said in several previous articles, in order to generate high returns , it is also important to take risks , be cautious, be disciplined and understand that all processes without cyclicals, for which the purpose of this article is to indicate advantages and risks that you could present when investing in the stock market. There are many options to start trading stocks online on your smartphone, such as MetaTrader 4. It is an online platform for starting stock marketing very conveniently. However, please keep in mind these below benefits and pitfalls of it. 

What are the advantages and risks of investing in the stock market?

What are the advantages of investing in the stock market?

The advantages of investing in the stock market are the following:

  • With luck, intelligence, dedication and analysis, returns can be generated that fixed income instruments or the same daily work and saving would not generate.
  • The stock exchanges are easily accessible, since the systems are automatic and you can work from anywhere, it is no longer necessary to even go to the offices of the stockbroker, it can even be done from your cell phone.
  • Stock exchanges are regulated by supervisory entities, therefore, the probability of fraud and unfavorable scenarios will always be inherent, but it is less certain that it occurs.
  • The benefit is mutual , on the one hand the investor maximizes his profits with the savings he dedicates to investing, and on the other hand the company in which he invested wins, since he is financing himself.
  • In the stock market, by presenting endless possibilities of companies from different industries, then the investor can diversify into investment portfolios that facilitate exchanges, mitigating significant risks of loss .

What are the risks of investing in the stock market?

The risks of investing in the stock market are the following:

  • If one does not have sufficient analysis, either through ignorance or neglect, there may be the possibility of investing at the wrong time, and maximizing losses rather than minimizing them.
  • They are investments that require considerable time to see profits (especially if it is small capital, where fixed costs absorb this concept), so the investment horizon is long-term.
  • Although the risk can be minimized , it will never be decreasing 100%, because the market risk cannot be mitigated
  • Despite the fact that the stock market is regulated, there is the possibility that the legislature may enact laws that can benefit the development of our investments.
  • While the money is in the capital market, the disposition of the flows will not be immediate, therefore there is a risk that we have an emergency and not being able to use the flows at the moment (called liquidity risk).

Hoping you liked this article, I invite you to comment, and do not forget that all decisions must be made with information and knowledge.

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