You require a deep knowledge of stock trade before venturing into the market. Almost 90% of people who start trading in the stock market get out of it in the first year, after losing money. Both lack of knowledge and overconfidence are the main reasons here. Hence, a high degree of mental strength and willpower is required to sustain in this area.
Stock Trade – Advantages
Good returns – Investing in stocks can give very good returns. Although there are many other options to invest your money but stock market is known to give the best profits.
Compound interest – One of the often ignored benefits of the stock market is the facility to earn compounded interest. Dividends paid by many stocks can be reinvested to earn extra returns. You can make your money grow faster this way.
Tax deferral – You’re only taxed on the profits, not on earnings from the sale of the stock. After all, important thing is not what you make but what you keep after tax.
Diversification – By investing in stocks the investor can get exposure to a broad variety of areas in the economy.
Time – You don’t need people and space for stock trading. In fact here you can work alone from the comfort of your home. There is also enough time left to have fun with family and pursue hobbies.
Flexible – Unlike your own business, where you have to bear losses and fight hard to make it lucrative, in trading, you can invest more in the stock you find profitable and sell some of which is not gainful. You have total control over your investment decision.
Stock Trade – Disadvantages
Loss of money – You can lose a lot of money in stock trade if the market goes down or if you make wrong choices – you can even end up broke.
Lot of hard work – The learning curve is very steep in the beginning. You also have to do a lot of homework and learn how to select your investments intelligently.
Sufficient funds – Be sure that you have enough savings to get you through a crisis before you trade in stocks. Otherwise, if your investments go down you may find yourself in trouble in even making ends meet.
No assurance – This is the chief disadvantage as there are many things which affect the market such as, political issues, natural disasters and government policies, etc., so you cannot be sure of growth.
One should enter into market only after understanding all these merits and demerits. Although everyone is not successful because share investment does not assure a fixed return but a wise investor who goes for stock trade can gain success and can make return of even 35 percent.