Stocks are among the traditional value enhancers in building financial assets. Let’s look at this statement in more detail.
Investments in stocks can be divided into several aspects. Speculative share purchases are short-term trades and cannot be recommended for long-term investors. The opposite is true for investors who want to save money for a longer period of time and at the same time not lose its value due to inflation. It is something else to lose the value of an investment by decreasing its value.
Importance of stocks
By holding stocks, you become a shareholder, which means that you are a co-owner of a joint-stock company. As a shareholder, you can participate in the management of the company. Of course, this applies provided that you are a majority shareholder or, together with other minority shareholders, you have a unified view of the company’s management.
Surely you can imagine what influence you will have on decision-making when holding several shares in a billion-dollar corporation. Your voice will not be heard much. But you don’t have to worry about that. The overall investment strategy is crucial.
Value of shares over time
According to a number of analytical studies, long-term holding of shares pays off. The investment horizon means a period longer than ten years. But a few decades is better.
For all types of investments, long-term regular purchases apply. Most often once a month. You can also buy securities quarterly or in another time period. Regular investments affect the final share price. The value of shares fluctuates over time. By buying securities at one point, you run the risk of acquiring shares at the most inopportune moment when the values are at their peak.
Dividends and growing value
By holding shares, you get a return in the form of a dividend. If the company whose shares you have succeeds, the certainty that it will pay a dividend increases. The second indicator is the value of the security itself. It fluctuates over time, but if the company is doing well, the value of the shares themselves also grows.
Thus, shares should not be missing in any financial plan, the owner of which wants to secure itself in old age and at the same time has sufficient funds and a sufficiently long investment horizon.