Investing in the stock market has traditionally been how the affluent hedge inflation risks. The stock market has a history of continuous growth over time which cancels out the effects of the diminishing value of currency, which is why many people choose to invest in stock.
Many present day billionaires and millionaires have begun their fortunes by risking their money on the stock of a new company.
For investors who put money into different types of investment products, a stock market investment has the benefit of providing diversification. Stock market investments change value independently of other types of investments, such as bonds and real estate. Holding stock can help you weather losses to other investment products. Stock also adds risk to a portfolio, as well as the potential for large, rapid gains, helping investors avoid risk-averse or overly conservative investment strategies.
Diversification enables you to spread out your risk so you don’t have to put all of your hopes and dreams behind the success of a single investment.
6. Tax Deferral
Tax Deferral is the greatest investing benefit the U.S. government has given to individual investors. The ability to delay paying taxes on your money can virtually double your investment power.
Buying shares of stock means taking on an ownership stake in the company you purchase stock in. This means that investing in the stock market also brings benefits that are part of being one of a business’s owners. Shareholders vote on corporate board members and certain business decisions. They also receive annual reports to learn more about the company. Owning stock in the company you work for can be a way to express loyalty and tie your personal finances to the success of the business as a whole.