Why Buy Stocks?

Now, investors who are into the stock market buy stocks for a couple of reasons, and it’s imperative to bear in mind that these reasons may vary from one person to another.

I believe that by now we are familiar with what the term “Stocks” mean, which is a share in the ownership of a company. Or in rather simple terms, stocks can be said to be a claim in the assets and earnings of a company. 

Now, investors who are into the stock market buy stocks for a couple of reasons, and it’s imperative to bear in mind that these reasons may vary from one person to another.

The major reason why people buy or invest in stocks is simply for:
•    Capital appreciation: They want the money they used to invest to grow and gain value over time. Why do they do that, you may ask? I’ll tell you.

In every business venture, people invest their monies because they want to get profit, be it in the short or long run. The same applies here too. An investor invests in stocks, buying them at a low price in hopes that someday, he can sell it at a higher price in the future.

It’s only logical that whether the price of the company’s stock falls or rises solely depends on the performance of the company, this can be discovered from the earnings and assets the company is able to acquire or make at some point in the future. Its common sense to make money by investing in companies you believe will make money.

•    Ownership Privileges: As a shareholder in a company, besides just making money and involving yourself in all the technicalities associated with stocks and all, you actually have some basic rights. You get to be included in some administrative decisions such as being able to vote for or against candidates that have been nominated to the company’s board of directors. You also get to vote for or against the proposals either the directors or even other shareholders make that may influence what happens in the company and how the company is run and managed.

•    Income: Most corporations and companies give their shareholders a portion of their earnings. These earnings are called dividends, and they are the company’s profits.

Okay, let’s not kid ourselves. The reasons why people should invest in stocks are really overwhelming, but, like I said earlier, the major reason why people buy and invest in stocks is so they can make more money, right? 

Imagine this; 
Mr. Harry is an investor. He sees a company with a potential to become something bigger in future and decides to purchase 200 shares at the price of N5 per share. Now, true to his business insights, the company expands and grows in a little over two years. Mr. Harry decides to sell 100 of his shares for N20, realizing a profit of N15 per share. I don’t have to tell you how much his overall profit would become.

There you have it folks. The reasons why one should buy stocks.