Stocks/shares shows ownership of your in that company. When you bought shares, actually you are buying ownership of that company.
Most probably question arising in your mind, why you should invest in stocks rather than while a lot alternatives are available like invest in banks( Risk free ) , Government Bonds ( Risk free ) , Mutual Funds ( less risky) and commodities.
The return on stock market is much higher than banks, bonds and mutual funds. If you can bare risk then i recommend you to invest in stock market to get better returns.
see, what you are getting from your bank investment. Let’s suppose bank is offering 10%/year interest rate on your investment and inflation rate in your country is 15%. It means
In 2000 You have 100rs
In 2001 You have 100rs + 10rs ( interest you get) – 15rs ( inflation) = 95
It shows that you are losing 5rs rather than getting anything. So it proves that you should invest somewhere else where you get more than 15% interest rate.
Real interest rate = Nominal Interest rate – inflation
Three things you focused while investing:
If we compare bank and stock return, obviously overall stock return is much higher than bank return which is fixed.
But there is no risk involve in bank investment while a huge risk involved if you are investiing in risky volatile stocks.
What about liquidity?
Liquidity means how much time your investment takes to convert in cash. Bank takes also advantage in third point.
But my suggestion is to you that invest your 30% of saving in stocks to get better return. Diversification always help you to get good return.
Stock exchanges in Pakistan:
- karachi Stock Exchange
- Islamabad Stock Exchange
- Lahore Stock Exchange