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What are the Benefits of Investing in Shares?

Dan Cavallari
Dan Cavallari

Investing in shares generally refers to buying shares of a company's stock. When a person buys shares of a company's stock, that person is essentially buying a part of that company, and as the company profits, so too does the person who has invested in shares. Conversely, investing in shares of a company's stock means the investor will lose money if the company performs poorly. The advantages of investing in shares are numerous but risky, as investments in the stock market are likely to appreciate or depreciate quickly, meaning an investor can make or lose money fairly quickly.

One way experts protect themselves from losing a significant amount of money is by investing in shares of stock from several unique companies. An investor, for example, may buy 10 shares of Phone Company A and 15 shares of Automobile Manufacturer B at the fair market prices. If Automobile Manufacturer B performs poorly and the price of the shares drop, the investor will lose money on those shares. If, however, Phone Company A performs quite well during that same time period, the value of those stocks will rise. Since both stocks are in the investor's portfolio, the investor has both lost money on one stock and made money on another. The values of each stock may not exactly balance each other out, but it is a good way to prevent the loss of all the investor's money.

Man climbing a rope
Man climbing a rope

An investor can make a good amount of money by investing in shares of stocks over the course of several years. Choosing the best stocks can be tricky, but the research will be worthwhile if the investor plans on building a retirement off his stock portfolio. Some stocks are good for short-term gains, meaning a savvy investor can sell the stocks when they become more valuable, thereby posting a profit. Others are better for long-term investments, and the investor can watch his or her money grow with the company in which he invested.

A person who wants to invest but does not want to do the research and constant monitoring of the markets can still make investments by hiring a person to manage the portfolio. Portfolio management services are available at financial institutions as well as on reputable online websites. An investor may also contact a mutual fund, in which an experienced professional takes the investor's money and spreads it out among several investment opportunities.

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