Investment has been a business term used for centuries, and it is a way for people to increase wealth over time. Money and resources are being used to invest for profits, and this requires analysis of future terms of goods and services or products. Various investment tools and shares have been one of the oldest financial instruments for investing in a business that has good prospects.
Today, we will look at why shares are a better investment than other investment vehicles such as cash and bonds, which are also in the same class as shares. Most people usually confuse one from the other as they can hardly distinguish between cash (saving money in the bank), bonds and shares, especially when it comes to bonds and shares.
When you buy a share of a company, you buy part of the company, and you become a part-owner (owning a percentage of the company). At the same time, a bond is more likely the company or business borrowing from you and will pay you interest from the money you lend to the business. While these different financial instruments have their advantages and disadvantages, shares seem to be the best investment instrument you should consider. I will explain why with some points, I will pick out one after the other.
Shares have high average returns
Every investor wants high investment returns when the instrument has matured. And shares remain one of the stable investment instruments with the highest average returns. The average returns from shares are more elevated than saving cash in the bank and buying bonds (Credit Suisse First Boston).
Looking at these numbers, there is no doubt where you want to put your money to ensure that you get the highest returns.
The power of compounding profit
Now some of you may be wondering what 5.0% is going to be worth in a year. Five percent of returns may look small if you are not looking at the big picture. But with shares, you have to consider the value of compounding profit. Shares is the oldest and trusted way to build generational wealth that has been passed from one generation to the other. Some investors have taken complete control of a business with a small percentage of shares and, having compounded the shares over the years, have managed to own substantial shares.
Now imagine investing $10,000 in the above financial instruments over 20 years. The result will be the following:
Cash would have accumulated to $12,200
Bond would have earned $12,950
Shares would have got to $28,090
Now you can see that with claims over 20 years, your investment would have almost tripled.
You tell me what the best choice for financial investment is!!!
Shareholders are part owners of the company
With shares, you can be part of something big.
Imagine being part of the initial shareholders of a company like Apple or Google. By now, you would not only be rich but enjoy dividends and other benefits shareholders of the company want.
Some companies allow their shareholders to be part of effective decision making in the company. Such an act places you in a significant position, and you being part of a vast brand may attract more financial and personal benefits.
The market can be fun and informative
Learning about shares and what causes them to move up and down give you in-depth business knowledge. And this knowledge acquired can help you in your business and finances. You can earn personally or become a consultant to other investors looking to know more about the financial market.
The market is also fun to observe as it moves up and down. It can be fascinating to predict the market based on some past and present analysis to get the market’s direction. However, you will need to find a trusted and knowledgeable financial market analyst to learn about the market.
Shares can easily be liquidated
I prefer shares to other kinds of investment because they can easily be liquidated for cash. Some brokers are available to take the shares off your hands at the mention of your intent to sell. While bonds and other types of financial instruments are not as easy to liquidate, this may put you in an undesirable position when you need funds.
To get it right with shares as an investment, you will need to find the right shares. Check stock news on CNBC, and financial news from top stations like Sky News, Bloomberg etc. There are other online channels where you can learn about investing in shares or visit the nearest broker to guide you through shares investment.
Get to understand the different types of shares and the benefits of investing in different categories of shares. Understanding this will enable you to determine the best shares to keep for the long term, short term and the ones that you should maintain and increase shares of the company.
Now that you have seen some of why I prefer shares, you should also research and understand more about shares. Although there may be ups and downs, I wonder which business does not have those; shares remain one of the oldest and most profitable investment instruments, especially for long-term investment.
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Recommended books for further reading:
- Shares Made Simple: A beginner’s guide to the stock market
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel
- Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week
- The Intelligent Investor – Benjamin Graham
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