Stock trading: advantages and disadvantages

Are you thinking about investing in the stock market? Then, know its pros and cons before you put in your hard-earned money.

10:29 20 August 2013

When talking about investing and growing money, the stock market always makes it on top of the list. Seasoned investors will typically recommend adding this to your investment portfolio as it offers great rewards although it also carries risks.

Stock trading is the process of buying and selling shares of individual companies or corporations. The idea here is to buy shares and sell them once their price appreciates and this could take weeks, months, or even years.

There are several advantages when investing in stock market. These include flexibility and variety. Investors have the option to make money by being active traders or by earning through dividends. Safe investors, on the other hand, can be in it for the long haul and perhaps use the money for their retirement.

As for variety, investors can choose from hundreds of companies listed on stock exchanges. This helps them diversify their portfolio to lessen the risk of losing money.

Stock trading, just like any other forms of investment, also has disadvantages. As share prices can go up and down depending on several factors, there is risk that you will not earn or worst, you may even lose your capital along the way. For this reason, stock market is only recommended for those people who have high risk tolerance.