Investing In Shares

The Advantages and Disadvantages of Investing in Shares

If you have been thinking about investing your money then you have probably considered investing it in shares. Like all investments there are advantages and disadvantages to investing in shares.

For instance, let’s say that your friend wants to start a business, but does not have enough money to buy all the things the company needs to invest in to operate. So you buy a share of your friend’s company by investing your own money to add to the company’s capital. In return, you get to own a portion of the company (a share) and will therefore become entitled to share in its profits.

Like any investment or business venture, investing in shares has its own pros and cons. Learning about the different advantages and disadvantages of the trade can help you decide if it’s the right financial step for you.

Advantages of Investing in Shares:

  • Your capital can grow.

Watching your capital grow is one of the main advantages of investing in shares. After all, who doesn’t want to invest a certain amount of money and watch it multiply over time?

If all goes well with your investment then capital growth is something you can certainly expect. In some cases, companies will give their shareholders free or discounted shares. If you are a shareholder then this means you will gain a greater degree of ownership over the company.  Therefore, you will earn a larger part of the profits once the company reaches its potential.

  • You can sell shares easily.

Unlike other investments, real estate, private businesses, art, collectables,  shares (in bigger companies) are both easy to buy and sell for very low transaction costs. When buying or selling shares, you will generally need the services of a brokerage. Unlike the services of a real estate brokerage firm, using an investment brokerage service is usually more affordable.

  • You become entitled to certain discounts and benefits.

Qualifying for discounts and other entitlements is another benefit that you can enjoy as a shareholder. For instance, if you own shares of a retail company then you might enjoy a discount when you purchase a product from that company. However, keep in mind that you will usually need to own a minimum number of shares in order to qualify for this discount.

Disadvantages of Investing in Shares:

  • It might take a long time before you see fruits of your investment.

If you are looking for a type of investment that can help you earn money overnight then investing in shares is definitely not for you. Investment is a long-term venture and not a quick way to become wealthy. Some of the most successful investors did not make their money back in as long as ten years. So if you are looking to make some extra money to buy a new car next year or take a luxurious vacation next summer, investing in shares might not be able to do these for you.

  • Investing in shares can be unpredictable.

Before you start investing in shares, you need to do plenty of studying. Even then, there is no way to guarantee the success of your investment. If you don’t like the risky and unpredictable nature of the stock market and you have no time for the necessary research it takes to make educated decisions, then investing in shares might not be for you.

On the other hand, if you are determined to become a successful investor then you can learn to enjoy the advantages and overcome the disadvantages of investing in shares. You may also seek the help of investment experts around Australia by visiting our business listings page.

 

Leave a Reply