Are There Not Disadvantages For Investing In Stocks?

If you have met people who don’t believe in investing especially in stocks, then you can bet that there’s enough to be used against the stock market.

However, just like a religion fanatic will always have a response to a non-believer of the same religion, you must be able to know the demerits of investing in stocks to be able to stand firm when you are being dissuaded.

As such, rather than talk about the promising opportunities the stock market has to offer and all the exponential returns you can make, here are some of the disadvantages of investing in stocks.

The Risk of Loss

A very apparent disadvantage is the possibility of losing in the stock market. What if the value of the stock I purchased gets lower than my investment and stays there? What if the market doesn’t move in my favour?

The truth is that there is a possibility of incurring losses when a company does poorly or below your expectation. However, just like most good things in life, there is a trade-off between risks and returns.

If the risk is too high for you compared to the amazing possibilities of a return, then you should consider investing in the bond market or in the money market where are relatively safer securities to invest in.

You Might Need To Wait For A While

If you want your investments to yield returns speedily or in our local parlance “sharp sharp”, then you have no business investing in the stock market as this will be a disadvantage for you.

However, time is a key factor in unleashing the amazing power of compound interest. If you’re still not sure why Albert Einstein called compounding one of the wonders of the world, then try to think of any other thing that exponentially grows as time increases.

You Get Paid Last

When you invest in stocks, you become one of the owners of the company and this is a different problem on its own. The challenge here is that as an equity investor, you get paid last. In the event of a liquidation of a company, you get paid after liabilities have been settled and preference shareholders have been taken care of.

Yet, you can bet there is a reason why the billionaires of the world are company owners. It is because with all the other methods, your returns or profits can only go far. However as an equity holder, there is no limitation as too how much money you can make.

Volatility Could Get You Scared

Stock prices are always moving. Volatility is to the stock market how humanity is to air. If you are one who panics at every form of loss, albeit temporary, this might throw you off a little bit.

However, this is also the point where you reaffirm who you are in the stock market – an investor or a trader? As an investor, you should ideally leave your funds to grow a little passively before trying to assess the changes in value. Anything other than this and you will be trading or even gambling.

While we can try to define all the possible challenges of investing in the stock market, it is clear that every disadvantage is little when compared to the corresponding opportunity it comes with. If any of these were the reason you were not investing, you might want to take another look.

Written by Lawretta Egba.