The Advantage of Investing in Stocks
Unlimited Upside Potential
- A stock offers unlimited upside potential. As long as the company that it represents keeps growing its profits, a stock can continue to go up in price. Returns of a thousand percent or more in leading stocks are not unheard of.
- Liquidity refers to how easy it is to convert an asset into cash at current prices. Stocks are very liquid: a stock can be bought and sold instantaneously, even several times a day. Investing strategies in stocks vary from day trading to multi-year commitments such as hedge funds or private equity.
- The costs of trading and investing are very low. Most online brokers charge single-digit commissions, and the annual cost of investing in a packaged product such as a mutual fund is around 1 percent.
- Stock investing has very low capital requirements. You can open a brokerage account with just $2,000; some traders trade penny stocks that literally cost pennies per share; and some stock mutual funds and direct stock purchase plans allow you to get started with as little as $50 a month.
Level Playing Field
- Stock trading is highly regulated. Regulation evens the playing field. Equal access to information gives a small investor the same chance to make money as a professional stock trader or institutional money manager. Besides, the stock market does not care who you are, what you are or where you are. All you need is knowledge, which can be acquired through self-study and practice. No other investment vehicle has so much readily available information to make informed investment decisions as stocks: stock investing sites and online publications, company websites, financial reports, prospectuses, stock picks and research reports, online chart and trading schools, live news feeds and stock trading chat rooms and groups.