The main aim of investing in stocks is to ensure that you are able to meet your future financial goals. The rise in inflation makes it difficult for us to just earn and save some part of our incomes. It is very important to invest your savings to meet the increase in prices due to inflation. The stock market is one of the oldest and most popular investment methods among investors due to its several benefits.
Buying stocks not only gives an opportunity to own a percentage of a company but it also comes with benefits such as dividend payouts and capital gains when the value of stock increases in price over time.
Domestic stocks happen to provide great opportunities for money growth in the long-term. It should be an important part of your investment portfolio. But, one should be aware that this greater potential for growth carries a greater risk, especially in the short term. Therefore, it should be looked upon for long term wealth creation, and for the short term, one needs to be cautious.
So it is crucial to understand your risk appetite before investing in domestic stocks. You should be aware that stocks are generally more unstable than other types of assets, your investment in a stock could be worthless when you take a decision to sell it.
Now let us see some of the benefits of having domestic stock in your portfolio which will have a positive impact on your overall financial health.
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Advantages
Diversification
Diversification is the practice of laying your investments around in such a way that your risk to any one type of asset is limited. This practice is designed to help reduce the instability of your portfolio over time. The idea is to simply spread your portfolio across several asset classes. One way to balance risk and profit in your investment portfolio is to diversify your assets and get some exposure to domestic stocks. Diversification can help reduce the risk and instability in your portfolio. It will most likely help in reducing the frightening ups and downs of the stock market.
Higher Liquidity
The Indian stock market compromises of two major exchanges, the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Both of them play important roles. Most of the companies trade their shares on either or both of these exchanges. This provides higher liquidity to investors because average daily volumes are high. Thus, if an investor wants to buy or sell any stock on the stock exchanges, he can easily do so.
It is also easier to understand the business activities and strategies of a domestic company. For starters, interviews with top managers, financial analyst reports about the corporation, and stock predictions will be the starting point to analyze a stock.
Wider Choice
The stock market offers different financial instruments, such as shares, mutual funds, and derivatives. This provides investors a wide choice of products to invest their money. The decision should be based upon the risk appetite of an investor. In addition to providing investment choices, this flexibility is beneficial in reducing the risks inherent to stock investing by enabling diversification of investment portfolios.
Get Ownership
Even if you acquire a single share in a company, you get a portion of ownership in the company. This ownership gives investors the right to vote. Although this may seem like an overstatement it is true and there are several instances when shareholders have prevented company management from making unreasonable decisions that are harmful to their interests.
Higher Returns in Shorter Periods of Time
If we compare with other investment products like bonds and fixed deposits, stock investing provides investors an incredible possibility of making high returns in comparatively shorter time periods. Sticking to the stock market basics, such as using stop-loss, take-profit triggers, and doing the research can significantly reduce the risks associated with stock investing. This will help in maximizing the returns on share market investments.
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Convenience
Nowadays, everything is online. The trades are also carried out on an electronic platform to ensure the best investment experience for investors. In addition to this, broking service providers offer online share trading facilities that make investing even more convenient. This is because investors from the comfort of their homes or offices can place their orders through the computer.
The Demat account holds all the products within their investment portfolio electronically in a single location, making it easier for investors to track and monitor the performance.
Regulated by SEBI
We know that the Indian stock market is regulated by the Securities and Exchange Board of India (SEBI). The SEBI has the responsibility of regulating the stock exchanges, its development, and even protecting the rights of the investors. This eventually means the interest of investors is well-protected by a regulatory framework while investing in the stock market.
This is how exposure to domestic stocks will impact your investment portfolio. It is suggested to have some exposure to stock investments to push your investments for that extra growth. Having said that you also need to be aware of the fact that stock market investment comes with a risk. Thus, doing your research before investing is a must.
