25.7.12

Why stocks are the best long term investment for young Proffessionals?


Young professionals are having lot of apprehensions about  investing in stocks. Let us see why investing in stocks can be the best thing that young professionals can do for their future.

Stocks are the best long term investment vehicles worldwide for a long time now.
Stocks of successful organizations has helped millions of people to make good fortune within a reasonable period.
Many of the world’s  richest people are there because of the value of the stocks they own in their respective companies.
For example,Bill Gates is the richest man in the world is because of the value of the stocks in his company- Microsoft.
Same is the case with Warren Buffet of Berkshire Hathaway and  Laxmi Mittal of Mittal Steel whom are 2nd and 3rd richest people in Forbes list.
As you know,  stocks are issued in the form of shares to represent the  ownership of companies. And the stock markets are where we buy and sell stocks.
In the stock markets investors like you and me can trade shares of companies thru intermediaries called stock brokers.
The returns from the stocks are from 2 ways.
    1. Appreciation from share capital  – When the market value of stocks appreciates share capital increases.
    2. Dividends- Dividends are the share of profit which company gives to all share holders for a financial period.
Now let us see why stocks are best long term investments?
Beats inflation:Bank fixed deposits and other currency investments perform poorly during inflation and end up in giving negative returns to the investors.
But across the globe stock prices  tends to increase as inflation increases. And so stock investments consistently beats inflation to give better returns to investors over long term. This happens because inflation boosts turnover and profits of companies. Higher earnings coupled with the same price-earnings ratio imply higher equity prices (EPS × P/E ratio = market price).
Therefore, equities are considered a good hedge against inflation - and hence an important component of any long-term portfolio.
No limit for returns: The greatest beauty of stock investing is that the returns are unlimited. Your investments can grow many times as per the growth of your company and its market value.
Those investors who make through studies and make sensible decisions to invest in tomorrows successful businesses can easily achieve financial freedom over long term.
High liquidity: Long term investments like real estate, arts etc. are not easy find a buyer and you may not be able to sell it whenever you require money and so having less liquidity.
As stock market transactions are done online and as there are millions of investors involved from across the world,   you can  sell stocks whenever you require money. You can get money within 2-3 days. This make stocks a beautiful long term investment.
Diversification of investment: You need not invest all your money in one company or in one industry. You are free to buy stocks of any company  from different industrial/ business segments.
This ensure diversification of investment and reduces risk in the long term.
Easy to handle: Stocks are easy to handle and we need not be caring about the security of the same.
The stocks are kept in your depository account just like a bank account keeps money. Unlike yesterdays all stock transactions are made online and done paperless. This eliminates the risk of theft , damage or loss to high value stocks. 
So stock investments are secure and the transactions are easy as you can do these with call to your broker or a do it yourself online.
No big amount required: You don’t require a big amount to start stock investments. As stock investment transactions are conducted in dematerialized ( No paper  documents / certificates)form, now you can buy even a single share of any company, which can be utilized by any individual irrespective of his buying power. Small investments made in stocks in regular intervals can give great results in long term.
So stock investments are one of the best long term investment young professionals can go for. For making profits IN STOCKS you need invest in good growth companies with quality management. Choosing the right stock is very crucial in this business and for that we need to analyse stocks.
Hope the article was informative to you. Please put your comments below to let me know whether there are any more reasons for stock investment, the best long term investment.
Happy investing!

Also read:
5 Best assets young professionals can acquire to achieve financial freedom.
The 3 reasons why people postpone their first investment plan.
The story of the King and the Sage & The power of compounding.

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