Investing In Stock Market
Are you looking for investment opportunities that can make you money with less effort or commitment? One of them is investing in the stock market and its one avenue that guarantees you a passive income. The stock market has been used for a long time as a revenue source by many investors who are interested in long-term returns. However, the stock market is also volatile and if an investor fails to do his research well or to make the right decision at the right time, the risk of loss of revenue is also very high.
Therefore, if you are a first-time investor or you are a seasoned investor in other sectors and you are looking for avenues to expand your portfolio, it’s important that you understand the key benefits and potential risks which are associated with the stock market.
Let us look at some of the benefits that investors get when they invest in the stock market.
- Investors Enjoy A Higher Return On Investments
When you compare the returns of stocks and other investment vehicles, you will notice that the stock market has higher historical returns. Also, if you have done your investment and predictions right, you can easily make huge returns within a short period of time.
When you invest in stocks you get an opportunity to get returns even in the long-term and your wealth will grow as the company grows. In addition, investors in the stock market also benefit from annual dividends payouts which are paid by the companies which they have invested in whether they make good profits.
- It’s A Good Way To Hedge Your Investments Against Inflation
One of the best investment strategies that you can use to make sure that you stay ahead of inflation is investing in the stock market. Most of the stocks have an average annual return rate of about 10% which is higher compare with the average annual inflation rate of about 2.9% in many economies. When prices are not favorable, you can hold your investment for a longer period tax-free because you only pay taxes when you transact.
- Investors Enjoy Stake Ownership In A Company
Anytime you buy shares of a given company’s stock, you automatically acquire a stake of ownership of that company. When you want to be part of the minority owners of a particular company that has a promising future, the easiest method is to invest in the stock market by buying shares of that particular company. As a shareholder, you get a rare chance to contribute to key decisions that management of that company takes.
- Stocks Are Highly Liquid
If by any chance you find yourself in a cash crunch, stocks are the most liquid asset class that you can choose to get money into your account in a very short period of time. When you compare stocks with other major investment vehicles such as real estate which take a longer time to sell, investors enjoy unmatched liquidity once they invest in the stock market.
Therefore, when you invest in stocks, you are relieved of the burden of waiting for several months or years in order to sell your investment.
- The Process Of Buying Stock Is Also Easy And Straightforward
Compared to other investment options that require a lot of paperwork and due diligence, the process of buying shares is simple and straightforward. Once you have done your research or you have received the right investment advice from your broker, you can easily create an account and buy your preferred stocks almost instantly. Today, the process of buying and selling stocks is even done online at anyplace making it even easier for investors who have tight schedules.
Stock Market Trends Analysis of Popular Companies in 2020
If you want to invest in the stock market and succeed in this venture, you must be up to date with the latest stock market news. In this stock analysis, we are going to have a look at how the stocks of these renowned companies have performed in the last few months so as to help you know whether it’s a good time to buy or sell.
Tesla Inc. is an electric vehicle manufacturer and clean energy-based in America. It specializes in electric vehicles, battery energy storage from home all the way to grid-scale. The current CEO of Tesla is Elon Musk.
The company was founded in 2003 and it has grown over the years to reach a market capitalization of $166 billion in 2020. Today, Tesla specializes in the production of Model S, Model 3, Model X and Y electric cars. In addition, the company sells clean energy solutions such as solar panels, Powerpack, Powerwall, Solar roof tiles, and Megapack batteries.
Tesla has continuously increased its global market share of plug-in and electric passenger cars with 17% and 23% respectively by the end of 2019. The company has a promising future because the sales of electric cars and clean energy are now increasing every year. As of March 2020, Tesla had already produced 1 million electric cars for sale.
Tesla stocks have also improved in value as the company continues to grow. As of May 5th, 2020, the latest closing stock price of Tesla was $768.21. Other historical data of this company stock prices indicate that Tesla stock all-time high closing price was $917.42 on 19th February 2020.
The 52-week high stock price is of Tesla is 968.99 and this is about 26.1% above the current share price. The 52-week Tesla low stock price is 176.99 which is about 77% below the current share price. On average, Tesla stocks have traded at about $392.80 for the last 52 weeks.
The below charts indicate how Tesla stocks have been performing for the last 5 years.
Apple Inc. is a multinational technology company which is located in Cupertino, California U.S.A. It was founded in 1976 by Steve Jobs and 2 others and it specializes in the manufacturing and selling of consumer electronics, software, and other online services.
Some of the popular Apple hardware products include; iPhone, iPad tablet, Mac, Apple Watch, Apple TV digital media player, wireless earbuds, and HomePod smart speaker.
In the field of computer software, it has macOS, iOS, TvOS, iPadOS, among other products and services. Tim Cook is the current CEO of Apple Inc. and as of August 2018, the company became the first public to be valued above $1 trillion in the USA. The multinational technology company continues to grow and it has over 500 retail stores in more than 25 countries around the globe.
The Apple stocks are also in a positive trend and they will continue growing if the recent trend is anything to go by. As of May 5th, 2020, the share price of Apple stocks closed at $297.56.
Checking the historical data, we can learn that the all-time high closing price of Apple stock was on February 12th, 2020 when it traded at 327.20. Also, the 52-week high stock price is currently at 327.85 which is about 10.2% higher than the current share price.
The 52-week low stock price of Apple is 170.27 which represents a 42.2% decline in the current share price
In summary, Apple stocks have traded at an average price of 245.88 for the last 52 weeks.
Here is a chart of Apple stock price history for the last 5 years (2015-2020).
Shopify Inc. is an e-commerce multinational company located in Ottawa, Ontario Canada. It offers online retailers an e-commerce platform and retail-point of sale systems. The company was founded in 2004 by Tobias Lutke, Scott Lake, and Daniel Weinand.
Shopify has grown over time and it currently supports over 1M small online retailers globally. The e-commerce platform facilitates online selling, online payments, and marketing, shipping, and customer care services. As of 2019, the Shopify e-commerce platform recorded more than $41.12 B of gross merchandise volume.
Shopify stocks have also grown over time and from the historical day, the closing stock price was $686.11 as of May 5th, 2020 which is a record all-time high. Other price valuations indicate that the Shopify 52-week highest stock price is 704.69 a 2.7% increase compared to the current share price.
The lowest value in a span of 52 weeks is 242.23 which represents a 64.7% decline against the current Shopify stock price. Shopify stocks have traded on an average price of 378.86 for a 52-week period.
The below chart indicates the historical Shopify stock price for the last 5 years.
Alphabet Inc. was created on October 2nd, 2015 as a result of the restructuring of Google and other subsidiaries. It’s a multinational technology company located in Mountain View, California USA. In the year 2019, Alphabet made revenue of 161.86 Billion and it’s currently the fourth largest multinational technology company in the world. The current CEO of Alphabet Inc. is Sundar Pichai who also heads Google as well.
Alphabet stocks have also recorded recommendable growth over the years and by the end of business day May 5th, 2020, the stock price of Alphabet closed at $1349.02. Other historical data of share prices indicate that the best-ever highest stock value of Alphabet stocks was on 19th February 2020 when the shares traded at $1524.87.
Analyzing the performance of this stock in a span of 52 weeks, the Alphabet high stock price is $1530.74 which is about 13.5% above the current Alphabet share price. The lowest value the shares have recorded under a similar period is $1008.87 which is 25.2% down compared to the Alphabet stock price.
On average, the Alphabet stocks have traded on a share price of $1248.90 over the 52 weeks period.
The below chart indicates the historical price and performance of Alphabet stocks over the last 5 years.
We all know that anything that is beneficial also comes with some disadvantages. Let us look at some cons of investing in the stock market that investors need to be aware of.
- The Stock Market Has High Risk
If you are risk-averse, then investing in the stock market is not for you because the market is volatile and there are winners and losers. When you don’t do your calculations right and you sell your shares when the share prices have fluctuated, you stand a chance to make huge losses.
In addition, when the company that you have invested with is mismanaged and does poorly, the share prices fall drastically and you lose a lot of share value if you decide to sell at such a time. To make sure that your investment is more secure, you need to diversify and buy stocks of different companies that are in different markets.
- The Stock Market Can Crash
Although investors are used to frequent and daily minor volatilities, any major market crash can throw all investor's wealth into the drain. The stock market is highly affected by external factors and any negative effects of crisis in the global economy hit the stock market the hardest. When there is a major market crash, investors incur huge losses and it can take many years to recover their investments if at all it’s possible.
- Stockholders Are Paid Last If The Company Goes Under
When a company that you had invested in is mismanaged and becomes insolvent, the company assets are sold in order to recover the debt owed and shareholder’s value. In this scenario, preferred shareholders and the creditors are the ones paid first and stockholders are given the remaining share if the company goes bankrupt.
How Can Stock Market Investors Reduce Risk?
Diversification is the only best method that investors can use to reduce risk. You can diversify by;
- Adding bonds, futures, derivatives and other investment commodities to your stock portfolio
- Investing your money through mutual funds where you spread your risk across many different stocks
- Investing in companies located in different markets, in different industries and countries to reduce the negative effect of external factors
- Investing in different companies with different capitalization. Companies with large, medium and low capitalization are in different sizes and they also perform differently in different markets and business cycles.