Why buying shares is better than saving money

Posted by Felix Okoli on Thursday March 20, 2014 at 13:27:12:

Saving money is a good thing but it may very well be better if it was invested in an income generating asset that you can quickly turn to cash almost as soon as you want to.

Companies, especially Limited Liability Companies and Public Liability Companies sell their Company’s Shares to the general public in order to raise Capital to expand their Business ventures. Buying Shares means investing in the Shares of a Company as a part owner.

Once you buy shares from a Company, you become a Shareholder and as a shareholder, you have some rights to the Company and you are entitled to some percentage of the Company’s yearly profit, this profit is known as Dividend.

Saving money, especially in a Bank has to do with Opening an account with the Bank and depositing money into your account. To most People, it is safer to save money in a Bank account than to invest in Shares. But the truth is that, investing wisely in Shares is a very profitable investment in the long run.

5 REASONS WHY BUYING OF SHARES IS BETTER THAN SAVING MONEY:
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- Higher turnover: The capital turnover you can get from buying the right Shares is normally higher than the interest most banks would pay you for will get while saving your money. At the end of each financial term, usually annually, Companies Share their profits with their Shareholders as Dividends. Apart from dividends, the share value of a company can also appreciate even much more that dividends paid and one can decide to sell or even hold on to the shares. In all, it gives a higher capital turnover.

- Buying of Shares is a Long Term Investment: Once you become a Shareholder in a Company, you are entitled to receive Dividends as long as you don’t sell the Shares to another Person, and even after your death, your next of Kin will still be entitled to your Dividend. This makes it a profitable long term investment and, and this is not so with saving. When you save your money, you get little or no interest on your savings in the long term. Unlike savings, your money earns more in the long run since it is invested in the economy of the country through the company.

- Selling Your Shares can give you more cash: After holding your Shares for a while, you can sell it to another Person at an amount higher than the original amount you bought it and make profit. Lets say, you bought 10,000 Shares at N5 per Share, making it your total investment N50,000, you can sell the Shares to another Person at N7 per Shares, making N70,000 for the 10,000, which is profit of N20,000.

- Option to Re-invest your dividends: When buying Shares, you have the option of reinvesting your Dividends, to bring you higher profits in the future. This is another smart way of investing and making more money.

- Involvement in Decision making of the Company: As a Shareholder, you can get involved with the decision making of the Company, especially if you are a Major Shareholder. You can help the help the Company take decisions that will bring in better profits.