Why Do People Hold Stocks

Why Do People Hold Stocks

Purchasing and holding the shares could be quite intimidating for the new investors as the prices of stocks could unexpectedly fluctuate any time.  One can make money in share market if the share value you hold rises but you could lose money if the price of shares goes down. Similarly, in digital currency, the same phenomenon works. The only thing different is that the market is more volatile than the stock market but the return is very high. You could easily trade in this market using software like crypto soft. Read through the crypto soft review to understand more about it.

Investors buy the stocks despite having the possibility of losing money because of several benefits that come with it which actually outweigh the potential risk of loss.

Benefits of holding the stocks

Return in investments- The main benefit of holding on to the stocks is that it has high potential to earn large returns. According to studies, the stocks have been able to produce more than 10% average return in a year for long-term investors. Investing in stocks for a longer period gives the opportunity to shareholders to ride out the poor performance period of stocks and take advantage of the long-term trends in stock.

Taxation- Taxes to be paid for the stock investments returns are lower when compared to the taxes to be paid on other income. Capital gains tax is much less when you hold the stocks for more than one year.

Dividends- Some organization offers regular cash payments to the shareholders from the share of organization’s profit known as a dividend.  When you hold a stock that pays a dividend, you could get a regular stream of income if the organization continues to make a profit. If you don’t prefer to receive the cash payments, you normally get an option to use the dividends to purchase additional shares.

Fighting inflation- The rate at which the prices in an economy are increasing is known as inflation. If the inflation rate exceeds your return on investments, then your purchasing power will decrease meaning the number of items you could actually buy would decrease.  For instance, if 3% inflation is experienced by an economy and if the bank pays 2% interest in the money you saved, then you are losing out actually 1% of the purchasing power every year. Stocks will allow the funds to grow a much faster rate than the inflation thereby increasing and preserving your purchasing power.

 

Author: Mia Schmidt

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