Are you in search of how you can make money investing in Stocks ? Stocks Investment is one of the ways to create wealth through passive income, in the post we looked at the benefits of investment in stocks/shares.
One of the ways to create wealth without much stress and efforts is by investing in the stock market also known as ” The Capital Market “.
The stock market has always out performed the money market such as the bank’s savings account, fixed deposits, interest earning accounts, treasury bills, and other lenders outfits.
Money invested in stocks in the stock exchange market growth in value over time as the quoted companies grows, develops and master their business segment. Some of these quoted companies may later became a dominant player in their chosen business line. These quoted companies tries to impress and deliver returns on invested capitals to their shareholders, they also tries to woo new investors to invest in the company by buying their shares. When new investors purchase the shares of these performing quoted companies this translates to more capital fund available for the the company to grow, acquired, expand and venture into new and profited business segments.
Most quoted companies are managed by trusted, experience experts in various fields and the manager are also part owners ( investors) of the company, unlike government or state owned establishments. This will bring about more devotion and dedication by the company managers to deliver profits to the company’s shareholders.
Benefits of Stocks and Shares Investment
By buying shares of a company you are a part owner of the company, you purchased their shares, and you are share in the profit or loss made in the operation and running of the company. All profit made in the course of the business are distributed into to the number of shareholders that invested in the company, likewise all losses encountered in the course of the company business are bored by all shareholders of the company.
A stock investors benefits in two ways by buying shares namely
- Appreciation in Stock price purchased
- Dividend yield of Stocks purchased
Its a wise investment decision to own different arrays of stocks in ones stock portfolio. Stocks can be used as collateral for obtaining loans from financial firms like banks and other lending outfits.
The Power of Compounding Effects in Creating Wealth Stocks and Shares
Compounding simply means reinvesting your profit or earning with your working capital. For instead your invested $500 in Treasury bill and after 90 days you earned $100.
In compounding you will reinvest both your initial capital ($ 500) and the profit earned ($100) , then your new working capital/ investment capital in now $ 600 which will earn you $120 after investing for another 90 days. So in your next investment cycle your investment capital will be $720 as you invest both your working capital and profit earned.
Start Early with Small Amount and Grow Over time with Compounding
The principle here is that the more capital your invest the more money or profit you make. So using compounding effect you can start with small capital and growth it over time. This above is a simple easy pathway to wealth creation without breaking the banks or go borrowing with the accruing interest charged on borrowed funds.
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Compounding is one of the wonders of wealth creation with low investment capital.
Capital Appreciation ( Price per Share)
Capital Appreciation: Investing in the stock exchange helps to overcome the inflation, as the value of money devalues over time. For instance if you have $500 in 2010, and you invested $250 in two quoted companies stocks and deposited $250 in fixed deposit interest earning bank, after 10 years, the value of the stocks you purchased will increase in value at least 35% – 56% compared to the money deposits in the bank account.
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