Why is the Stock Market So Lucrative?
The stock market is infamous for generating large amounts of income quickly. Not everyone can be Harshad Mehta or Parag Parikh but they can be like that uncle or aunty who just purchased a Mercedes because of a profitable return on their investment. In Spare8’s fashion, we’ll breakdown 3 main points as to why the stock market is a booming platform:
1. Miracle of Compounding
Compound Interest is the addition of interest to the principal sum invested and to the interest already paid. This topic that we all learnt in 10th grade math has larger significance in the stock market. When you invest, the money keeps amalgamating and collecting. The more you invest, the more it accumulates and multiples. It is notable that the stock market is distinct from the economy. While India is in the midst of an economic recession, the stock market is booming and providing returns to avid investors. This is because their invested money has undergone the “miracle of compounding” wherein more money is generated with time.
2. Availability of Undervalued Companies
The stock market is home to undervalued companies along with the moderately valued and the overvalued. When you invest in an overvalued company, it is extremely risky as you may pay more for the stock than is required and lose money. The same can be applied to buying a stock close to the market value. Undervalued stock, on the other hand, diminishes the risk of investment. Do you remember when it was Black Friday and you wanted to buy everything because it was simply a good deal? Undervalued stocks are the discounts and good deals of the stock market. You only have to find the Black Friday stocks in the market. This would increase the profitability of the investor.
3. Highest Annualized Returns
Annualized Return is the geometric average of the sum of money invested in a year or a period. The stock market provides the maximum annualized returns a consumer can earn from investments. As it is controlled by various factors, through severe research, a consumer is capable of earning large sums of money. Although some may criticize the stock market for being volatile, its nature of perseverance has proved to be a healthy form of investment to gain high returns.