Investing is a vital element of our lives today. It is simply defined as the process of using your finances to make more money by putting it into one particular business venture. It is slightly different from trading because trading is a short term activity. An investor can buy a real asset, or they could put their money into securities/ financial assets such as company or bond shares. Investments are however vulnerable to the fluctuations in the marketplace and are destined to rise and fall in value accordingly. Many factors have an effect on the course the investment will take. To be able to make real-time, practical decisions about whether to place your money in an endeavor or not, we are going to discuss the pros and cons of investing.
The pros of investing
- We all know investment for its potential for bringing great investment returns. If you put your money into a business venture for example, at this time of the next year, the business may have outgrown the projected profits. If you consider all the necessary parameters before investing in a particular course, investment can prove to be worth your while and actually be a building stone to a great financial future.
- Investing is the alternative to trading. It is particularly attractive to individuals who find it extremely hard to participate in short time trading. These individuals think it impossible to determine short time moves with constant accuracy. By investing, such people and companies are able to track the development of their investment in a long term review be it in terms of months or years.
- It’s a sensitive approach for those who are interested in the markets but do not have actually had time to make it part of their daily life. It is a very relaxed way of participating in the business market, let’s say if you are a businessperson that is constantly on the move.
- Since investing is a long term feat, it allows a business person to tap into the potential long-term capital gains tax, which generally has lower tax rates than the short-term capital gains tax.
- If one of your investments is successful, it can be easy to put the returns into another investment, and this can lead to a lot of prosperity on your side as a trader. A good return on any given investment maximizes earning potential. You can also put the gains aside as part of your life savings
The cons of investing
- There is a possibility of losing the capital put into the business. Investing is a risky affair, especially if you do not put much thought and consideration into the process. If the company plan goes wrong, one or all investors end up losing their capital. Losses could be grueling especially if that was the only thing you were relying on for your livelihood.
- Investing can be a very slow way of making money. It requires patience. If you put your money into a business today, it can take up to a year or more to start realizing the returns. This would have been enough time to make a huge profit as an excellent day or swing trader.
- Investing rarely re-uses the same capital. This means that an investment’s returns may not even be half as good as a professional trader’s return. While earning an average of 20% returns yearly may be acceptable to an investor, some traders make the same profit in a week or less. This shows how much time needs to be put into an investment to see tangible returns.
- Investors have a hard time outperforming their day counterparts in the marketplace. Sometimes it is better to just invest your money in an equity index fund and not touch it at all than to make a long term investment. It may take a long time for a company to make enough noticeable profit even after a lot of effort.
- In the case of an investment on collectibles, its value is subject to rising or falling depending on its availability and popularity in the marketplace. The prices are subject to fluctuation based on any factors from public confidence to how your competitors are faring. If you had a large investment in a failing market, it could be considerably disadvantageous and inconveniencing.
Trading is a long term strategy and therefore, before making an investment decision on anything, be sure that you have done a thorough market research and known the potential of your venture. Do not gamble with your money as it may have lasting effects on your financial livelihood. There is always a chance that you may lose your money, but you should always have some expectation that you will make profits should you choose to invest.