Are Stocks A Good Investment?

There are 2 main reasons why stocks are good investments.

1. Stocks gives you the opportunity to own a successful companies.
Although, small business is also a way to earn wealth but it will take more than effort and time before it becomes successful and there's the risk of failure specially if your competitor is a big company. Buying the stocks of these big players like Jollibee, Alaska Milk or GMA7 will give you the rights to become a part owner of the company or shareholder as I have mentioned in my post "What are stocks?". Buying stocks is like the saying "if you can't beat them, join them".

2. Stocks have been the best investments over time.
As per the Philippine Stock Exhange, from January 1989 to August 2009, the Average Annual Total Returns is 14.1%. This outperformed the 91-TD Bills and of course the earnings from Savings. Take note that the key here is investing in long term.

Now, the downside of Stocks investing is:

1. You can lose money if the company lose money and declare bankrupt. 
Owning stocks is owning business, if the company is profitable then the stock price will follow (though not always immediately).  The same holds true if it loses money and worst if the company dissolves.

2. The stock market  movement is not linear and unpredictable in the short term. 
Stock market are subjected to the psychological status of the all the investors. This is the reason why stock market crashes during economic crisis and exuberance during bull days(bulls means stock market is going up).  Panic and selling during the bear days (bear means stock market is going down) can make you lose your money and shirt. However, if you use rational investment strategy, these roller coaster of the market can work at your advantage.

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