While financial uncertainty emerges during Corona, stock markets are increasingly gaining popularity, especially among retail investors (also known as amateur- or individual investors).
That is mainly because the rise of the pandemic has forced people to take on more risk and, setting aside money in a traditional savings account, bears the risk of inflation and low interest rates.
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And, albeit safe, its purchasing power will erode over time.
SUMMARY
- Keep up with the surge of inflation
- Easy buy Easy Sell
- Tax-efficient investment
- The power of compound
- Make your money work for you
- Invest with little money
- Take advantage of a growing economy
1. Keep up with the surge in inflation
The primary benefit of investing during inflation is to preserve your portfolio's buying power.
For consumers, inflation can mean stretching a paycheck even further, but for investors, this could mean continued profit as they add to their retirement fund.
2. Easy buy Easy sell
The stock market makes it easier than ever to buy a 'slice' of the companies you love but also to sell them any time you urgently need some cash.
You can purchase and sell them through a broker, financial planner, or online.
3. Tax-efficient Investment
The majority of investors understand that if you sell an investment, you might be liable for taxes on any gains. You could also be on the hook if your investment distributes its earnings as capital gains or dividends, whether you sell the investment or not.
However, by nature, some investments are more tax-efficient than others, such as ETFs, simply because they trigger fewer capital gains.
4. The power of Compound
Simply put, compound interest makes your money grow faster because interest is calculated on the accumulated interest over time as well as on the original principal.
Compound interest can create a snowball effect, as the original investment plus the income earned from those investments grow together.
For this reason, many investors suggest that the sooner you invest, the more you'll benefit from it.
5. Make your money work for you
Being in the markets is not the same as trying to time the markets. Most experts will advise against pulling money in and out of investments to take advantage of favorable fluctuation and minimize loss when the market dips.
The best way to take advantage of your investments is to leave them alone.
6. Invest with little money
The common perception of "you have to have money to make money" no longer holds any truth. Thanks to the internet it has become increasingly easy for consumers to get started with very little upfront money.
This means that you can put a few bucks aside until you are comfortable enough with investing before making bigger commitments, thus putting little at risk.
7. Take advantage of a growing economy
Corporate earnings usually increase as supply and demand go up, resulting in a growing economy.
This could include factors such as increased job security leading to an increase in income and sales.
The Benefit to you in a simple example:
*Often, bank accounts offer no, even negative interest rates whilst several financial products, such as ETFs have an average of 7% profit a year.
If you decide to set aside €10.000 in your savings account, in 10 years you will still have the same €10.000. Take inflation into consideration and your savings will have dissipated.
Investing the equivalent in ETFs will yield an amount of €19.668 at the end of the 10 years. However, to invest in ETFs, it is highly recommended that you possess sufficient knowledge about the markets.
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Choosing the best Online Broker
Be certain about your financial goals before trying to filter through online brokers by asking yourself a few questions first.
Once you know which investments are best suited for your specific needs you can start evaluating online brokers by considering factors such as commissions and structures, minimum requirements, fees on technology, software, platform and reporting, financing rates and market reputation.
MEXEM understands that broker’s commission may be the difference between success and failure with investments. That is why the company remains committed to a low commission structure and leading the way for lower fees in Global Markets.
With minimum requirements and zero fees on a strong market maker-designed IB Trader Workstation (TWS) platform, MEXEM has a competitive edge and renowned market reputation to begin investing today.
To take full advantage of your first investment in stock markets, get in touch with MEXEM.
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