Pros And Cons Of Investment In Stocks In 2022
Investing in financial markets online via brokerage services had proved to be an excellent endeavour in previous years. If you want to jump on that train, make sure you get to know its mechanism, pros and cons. Also, if you aim to invest in any other assets online, read as many reviews as possible, such as HubbleBIT Review and compare the various offers. Make sure you know everything about the assets you invest in and choose the right broker to increase your chances of success.
What are Stocks?
By definition, a stock means part of the company’s capital. As a result, all persons who hold part of the company’s capital or become owners of the share. This has several advantages.
Return on Investment
The procedure is quite easy to make gains through active investment in stocks. Note that it is not good to fix an exact sum. Be aware that a few parameters, namely condition the gains:
- The amount invested;
- duration of fund investment;
- Price fluctuations.
In addition, the sources of profit for a shareholder also depend on the following factors:
Capital gains: This is the profit that an investor makes in active investment (share) through the purchase or sale of the stock market securities;
Dividends: This is part of the profits that the shareholder of a company receives per year for certain situations. Dividends represent passive earnings that supplement capital gains.
As an indication, an active shareholder decides to buy shares of 3,000 euros in an establishment that has a nominal value of 100 euros. This sum will allow him to acquire 30 shares in 2021. If, thanks to market fluctuations, the share price increases and reaches 200 euros, the shareholder will make a profit of 100 euros per share purchased. That said, he realized a capital gain of 100%. In 2022, he would have totalled a gain of 100 euros x 30 = 3,000 euros.
Pros and Cons of Investing in Stocks
Pros
Active investment in stocks can be a source of good business. This type of investment helps you:
Increase the return on your investment;
Take advantage of less tax treatment over the entire investment period;
Intervene in the activities and management of the firm during general meetings of investors;
Obtain dividends when the company realizes gains and decides to proceed with the distribution.
Cons
You should be aware that the risk taken can be significant with active investment in stocks. In fact, shares are not financial tools that guarantee a return. When you invest in a company whose financial status is in poor condition or the sector of intervention is not well known. Stocks can easily experience a depreciation of your savings in a short period.
Likewise, it is essential to know that the volatility of stocks is quite relative. For this, as a shareholder, you must prepare yourself psychologically to face capital losses insofar as you opt for active buy-hold investment.
We hope we have helped you in grasping several aspects of investing in stocks. And finally, always remember to diversify your investments and search for other asset types as the main investment rule says don’t put all your eggs in one basket.