How Investing In Stock Helps Preserve Wealth

There are no limits to how much one can earn from investments in equity. As a company’s business expands, the value of your stake in the company grows as well.

Forget the want of becoming millionaires, we all need money to survive and live our lives. While most people procrastinate when it comes to making long term financial strategies until it’s too late and are then forced to live from hand to mouth, there are those – people like us, in the business of not just earning income but also creating and preserving wealth.

There are two main approaches to this: Some people opt for more daring strategies and trade for short term gains. The others are those who invest for the long term with the goal of securing their funds in safe securities.

Without a doubt, stocks can help you attain any of these objectives. However if wealth preservation is your thing, then there are some ways in which you can preserve your wealth through investment in stocks.

Understanding Wealth Preservation

Investors hold their funds in various types of investments according to their investment objectives. An investor’s objective or portfolio strategy is dictated by a number of factors, including age, investment experience, family responsibilities, retirement, etc.

For the young, capital preservation might not be everything. However, preservation of wealth or capital is a priority for retirees and those approaching retirement since they may be relying on their investments to generate income to cover their living expenses.

These types of investors have limited time to recoup losses if markets are bullish and give up any potential for high earnings in return for the security of existing capital.

How Equity Helps

Since retires, for example, generally want to ensure that they don’t outlive their retirement savings, they usually opt for investments with minimal risk such as treasury bills, high yield savings accounts, money market accounts, etc. to secure their funds.

Unfortunately, the gains are awfully limited primarily with inflation being higher than their interest rates.

By investing in dividend stocks with strong fundamentals, you can earn an income and also grow your wealth steadily. While opting for a growth strategy involves finding stocks of companies that are focused on capital appreciation, wealth preservation is primarily geared towards keeping your funds for the long term.

More so, numerous studies have shown that the stock market has historically outperformed (in the long term) fixed-rate investments and savings accounts.

There are no limits to how much one can earn from investments in equity. As a company’s business expands, the value of your stake in the company grows as well.

By investing for the long term, short term volatility is excluded and your invested funds can grow exponentially until sometime in the far future when you have successfully built wealth.

Written by Lawretta Egba.