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.
1. Investment Gains
One of the primary benefits of investing in the stock market is the chance to grow your money. Over time, the stock market tends to rise in value, though the prices of individual stocks rise and fall daily. Investments in stable companies that are able to grow tend to make profits for investors. Likewise, investing in many different stocks will help build your wealth by leveraging growth in different sectors of the economy, resulting in a profit even if some of your individual stocks lose value.
2. Compound Interest
Compound Interest is a miracle of the financial world. Compound interest, when given time, helps your money grow faster and faster.
3. Dividend Income
Some stocks provide income in the form of a dividend. While not all stocks offer dividends, those that do deliver annual payments to investors. These payments arrive even if the stock has lost value and represent income on top of any profits that come from eventually selling the stock. Dividend income can help fund a retirement or pay for even more investing as you grow your investment portfolio over time.
4. Time Value of Money
The Time Value of Money is a simple concept. Basically, it means that the more time you give your money to work for you, the more your money will make for you.