Which Of The Following Is Not A Reason Why People Invest In The Stock Market?

Q. Which of the following is not a reason why people invest in the stock market?

(a) Investing in companies through the stock market offers a chance to share in the profits
of those companies.
(b) Investing in companies through the stock market offers a chance to share in the profits of those companies.
(c) Investing is a guaranteed way to make money.✔
(d) None of the above.

A: Option (c) is the correct answer to the question.

Explanation: When investing in stock market, there’s no guarantee of success. There’s always a possibility of the venture failing as well. Hence, people do not expect a “guaranteed success” when investing in the stock market.

Keep reading till the end of the article to get to know more about the topic!

Things To Consider Before Starting With Investing

Now moving on from “Which of the following is not a reason why people invest in the stock market?”. There are a whole lot of things that you need to pay heed to before getting started with investing in the stock market.

Here is a list of a few such things that you need to be aware of:

1. Avoid Going For Individual Stocks

A. When just getting started with investing in stocks, you need to make sure to avoid going for any kind of individual stocks. Rather it is recommended that you go for index funds. It could either be a mutual fund or even an exchange-traded fund (ETF). These sorts of funds also have the capacity of holding about a dozen stocks.

2. Stay True To Your Portfolio

A. Another important thing to keep in mind is the fact that investing is a long-term activity. Investing for the short term is absolute foolishness and a shortcut to facing only losses.

If you invest in stocks for the long-term then there’s going to be a higher probability of you getting success in your venture. At the same time, you also need to make sure that you are not checking for financial-related updates too frequently, as that would only end up unnerving you.

3. Buy The Right Stocks

A. It also becomes very important to purchase the correct stock. When initially considering the options of stocks (for investing), you need to pay attention to factors like the potentiality of the stock and its future. Do not just base your decision on how a stock has performed in the past.

Make a thorough estimation of all the competitive advantages of the company that you are going for.

4. Avoid Trading On Short-Terms

A. You need to make sure to gain an understanding of the fact that investing in stocks for the short term is not fruitful/eventful. There are a lot of people out there who only invest money in stocks for the short-term and then end up losing all of their money. Rather, you need to consider investing for the long term.

The company where you end up investing is also going to have a lot of high-profile competitors as well! A careful and effective strategy would be required to strategize properly. This is the only way it will benefit you in the long term.

5. Build A Diversified Portfolio

A. A massive advantage of diversifying your portfolio is the fact that it lessens the risk exposure of facing massive losses. For instance, if you end up facing any kind of loss for your owned stocks at one company, then you are still going to have the chance of making it up with the other stocks (of a different company) where you have invested.

There’s also another thing at play here. Diversification of portfolio does not just mean additional stocks – you need to invest in stocks of different industries.

6. Be Ready To Face The Worst

A. Failure and loss are things that are inevitable in this path, but they should never deter you. Losses are really common when investing in stocks as the market is always fluctuating. To make your chances of winning much better, you can opt for diversifying the portfolio – for better chances at gaining success.

Tip: If you missed out on my answer on “Which of the following is not a reason why people invest in the stock market”, then you can go back to give it a read.

7. There’s No Right Time To Investing

A. There’s no correct time to invest in the stock market. Hence, if you have decided to invest in stocks then you need to jump in right away. There’s no better time to invest in stocks than the present.

8. Use A Simulator First

A. Before entering into the real world of investing in the stock market, you also need to make use of a simulator for it. The way these simulators work is by trading accounts with virtual money that won’t put the real money at risk in any way.

To Wrap It Up!

which of the following is not a reason why people invest in the stock market?

Investment in stocks is always subject to market risks, so make sure not to invest all of your money in one place. Also, as stated earlier as well, you need to diversify your portfolio to not face major losses when investing in the stock market.

Thank you for reading up till the end of the article. I hope you found the information regarding “Which of the following is not a reason why people invest in the stock market” to be useful.

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