Let’s get to the point right away. If you want to make more money, you need to start investing. And if you have decided to invest, you need to get on board the Sri Lankan Stock market. This post is all about the benefits of investing in Sri Lankan stock market.
If you have no idea about what the Stock market is or what Colombo Stock Exchange is, I suggest you read our guide on How to make money in Sri Lankan stock market which explains the basics. If you want to know how the stock market and its components work, start reading the Basics of Sri Lankan share market: The big picture. If you know a bit and want to start investing right away, read our post on How to select a stockbroker in Sri Lanka.
Now to the good stuff.
Most of the time, we are afraid of the unknown. It’s the same with investing in the stock market. If you have no idea about investing or what the heck is Colombo Stock Exchange, you’re not likely to start investing in it.
So rather than listening to your friend who always says things like “Sri Lankan stock market is volatile” or “you need to have insider information to make money in the market” or “investing in stock market is risky,” it’s important to pump your brain with right knowledge.
Of course, investing in stocks is risky. So are many things in life. You gotta a risk it to get the biscuit. But if you do it right, you’re going to be closer to your financial freedom than your stupid friend will ever be.
This is why you should start investing in stocks, right now!
Comparing with all the other asset classes, stocks have given one of the highest historical returns over the long term. Source: (Unshakable by Tony Robbins)
You make money in two ways
When you have a bunch of stocks, you’re making money two ways. Most investors intend to buy a stock at a lower price and sell it when the price climbs. Imagine you purchase a stock for Rs.80. After few months, the stock price climbs to Rs.100. Then you can sell your stock and make Rs.20 as a capital gain. That’s one way of making money.
Most companies pay dividends for their investors. Dividends are an amount every company pays for their shares quarterly, semi-annually or annually. The company would decide how much they are going to pay for each stock and they would pay despite the share price falls or climb. If you have 1000 shares from a company, they would pay dividends for your 1000 shares no matter what happens to their stock price. That’s the second way of making money from stocks.
Easy to buy and sell
The stock market makes it easy to buy and share stocks. All you have to do is find a broker and get registered. Once you do that, you can easily buy and sell stocks. Many other investments such as real estate take time and are a lot more complex than the stock market.
This also makes it easier to turn your stocks into cash (higher liquidity).
You can diversify
Imagine if you have to put all your money in a single investment. What if that investment fails? All your money will be gone! That’s too risky. But in the stock market, you can diversify your risk. You don’t have to invest in a single company. You can buy shares from different companies which are operating in different industries. That way, you can spread your risk without putting all your dreams and hopes behind the success of a single investment.
Even though individual stock prices can plummet, the overall market will climb over the long term.
You can access any share and any company
If you have sufficient funds, you can basically access any stock that is listed on Colombo Stock Exchange. You can at least purchase one share from every company that’s listed. This is not the case with other investments.
Availability of information
There is enough and more information out there about stocks and companies. When a company is listed on Colombo Stock Exchange, they are required to share their Annual reports and Quarterly reports. Whether you own any shares or not, you’ll be able to easily access these reports online.
Also, most stockbrokers in Sri Lanka do their own research reports on different areas and share with their investors. So if you want to know about a company or even an industry before purchasing stocks, there are plenty of reports available out there. And everything is basically online and free.
You get the ownership
When you purchase a stock from a company, you become a “shareholder” of that company. Basically, you will be an owner of that company. You will be able to cast your vote on annual general meetings. You will receive annual reports of the company.
Sometimes a company will decide to issue stocks for a discounted price for their existing shareholders. Imagine you own 1000 shares from a company and they decide to offer one-for-two shares. That means for 2 shares you own, they will give you 1 share at a discounted price. So you’ll be eligible to buy 500 shares for a discounted price. This discounted price is not available for new shareholders.
Basically. you get to buy shares from the same company for a lower price.
This might not be an actual benefit but if you want to impress someone (a lady friend maybe) with your “financial” expertise, you can do so. You’ll be offered the “Official Bragging Rights” as soon as you buy your first share!
That’s all for this post folks. Like I always say, knowledge is not power. Knowledge is potential power. It doesn’t matter how many posts you read about investing if you don’t invest. So take that step you’ve been planning to take. Start investing right now.
If you’re looking for a potential stockbroker, read our post on How to select a stockbroker in Sri Lanka to know everything you need to know.
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