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Why Should I
Invest?
There are two basic reasons to
invest in the stock market in a free enterprise society such as the
United States.
1) It is important to
make some type of investment(s) for the future. A relatively
small sum set aside each year can make an important contribution to
your long-term security. Investing as early as possible can make
a big difference in how much wealth is accumulated. In the Stock
Market Game™
Program in Missouri, we teach the basics of investing in stocks. Other
types of investments include certificates of deposit, savings
accounts, corporate bonds, and U. S. Treasury Bonds, to name a few.
From 1926-1990, common stocks have average a gain of 10.1% annually,
while corporate bonds have gained 5.2%, and Treasury Bonds have gained
3.7%. Therefore, investing in stocks is the most
profitable type of long-term investing, though it also carries higher
risk.
Day-to-day reports on the stock
market are volatile. You may often hear the market was up or down 50
points today. The 'market', also known s the Dow Jones Average (DIJA),
is a composite of 30 common stocks based on a weighted average.
Stock prices do fluctuate daily and that is why one should not invest
in stocks for short term purposes. The 10% gains mentioned above
refer to investments of 10 to 20 years. when you purchase a
share of stock for the long term, it is buying on the long position.
Another type of investing in the stock market is short selling.
2) The economy, as well as
the individual, benefits from stock investment. Corporations
issue shares of stock to raise financial capital for growth.
This financial capital can be used in a variety of ways.
Including building new plants, buying new equipment, and increasing
research and development into newer and better products and/or
services. As a corporation grows, so does its need for
employees. As more jobs are created, more people are able to
find work and the unemployment rate decreases. As more
individuals become employed, product and service sales increase,
leading to a higher demand in those areas, which leads to an increase
in output by the corporations, and an increase in jobs, creating a
cycle of economic growth.
Overall, investing creates economic
growth for the well being of everyone.
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