Shares advantages and disadvantages
What are the advantages and disadvantages of shares?
And why I buy shares.
As far as I have noticed, the Germans are real stock muffle compared to other countries. They save a lot of money but apparently only on the good old savings book. Actually this is incomprehensible, since at present the interest rates are close to zero and the inflation eats up the money. I don’t quite understand it either. In the long run, shares are a very good investment. Of course, it also depends on the respective stock itself. But I believe that for a long-term investment strategy, stocks beat any savings account.
Stock trading losses
Unfortunately, many people seem to want to hear and see only the negative of the stock market. Everyone knows someone who has made losses on the stock market. It is sad that only the negative voices are heard here. Who deals a little with the subject, will see that it is quite possible with shares to increase its assets.
In this course it must be said of course also that also shares can bring advantages and disadvantages with itself. Which are those for me, I try to explain in the following once.
Advantages of shares
With the right stock and strategy can probably generate almost everyone profits. Depending on the share and time even enormous profits are possible. Nevertheless eyes on with the share purchase.
A savings book or also daily money does not bring really much. The money is just lying around and due to inflation the value of the money can even decrease. Shares can beat here probably each savings book loosely. Here the actually boring Dax can be used for comparison. In recent decades, the Dax has risen by an average of more than 8 percent. Even after deducting inflation, this is still a better return than savings books and the like. However, it is important to remember that shares should be held for the long term. After all, there have been a number of crises in recent years, and it is only over time that the Dax has developed positively overall.
Another advantage for me are the dividend shares. In the world, there are very many companies that pay a dividend to its shareholders. In Germany, for example, this usually happens once a year. But in the U.S. there are many companies that pay out quarterly and there are also companies that pay dividends even monthly. If you want to build a dividend strategy, such stocks are an advantage.
Buying and selling shares is also very flexible for me. Here, of course, you have to look at when the respective trading center is open. Within these trading hours, however, shares can be bought and sold. Depending on the strategy, it is also possible to trade on the stock exchange in the short term.
For me a big advantage is also the actual selection of shares. There are probably thousands of shares for personal trading. The large selection can also be a bit overwhelming at first. But this is also well solved. Depending on the industry and country, there are different indices, which makes it much easier to allocate the shares and companies.
Disadvantages of shares
Of course, shares do not only have advantages, so here are my impressions of the disadvantages of shares.
Of course, share prices do not only always rise. Share prices can also fall. Especially in crises (such as the financial crisis or the Corona crisis), shares can also lose a lot of value. Cases such as Wirecard also show that one’s own money can quickly be gone. This is clearly a disadvantage of shares. However, this disadvantage can be reduced enormously if the shares are spread over many sectors and countries. And staying power is also required. In this context, one often hears BUY & HOLD.
As a disadvantage of shares I would also count that the return is not really fixed. With overnight money, for example, a return of 1.5 percent can be fixed. This remains then also in such a way and one can count on this net yield further. In the case of shares, prices fluctuate and therefore a fixed return cannot be expected. In this case, it will only become clear later on in which direction it could possibly go.
For me, probably the biggest disadvantage is the beautiful final withholding tax. This great tax is always deducted nicely from the profit. I thought the system was much better before the introduction of the flat rate tax, even though I was not yet active in the stock market myself. At that time, profits were tax-free if the stock was held for at least one year. It would be nice if something like that were introduced again today. Even with a term of 5 years, if you like. I myself would like to hold my shares for a very long time anyway and thus provide for my old age. But these are dreams.
When I weigh up the advantages and disadvantages of shares that are relevant to me, there is only one conclusion for me: buy shares. Before buying shares, you have to inform yourself in detail, otherwise you might as well throw your money out the window.
Therefore I operate AKTIENDUMMY and would like to make my own experiences public here. From mistakes one learns (hopefully). I write therefore also completely openly here, which I made. Maybe my own experiences will help other stock beginners.