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Three Reasons Why You Should Adore Stocks

There are many who would deem the stock market as a place for speculators. To a certain degree, yes, there can be large numbers of speculators in the market.

Furthermore, a glance at any share’s daily movements might make it feel like a game of chance. But, those who feel the market’s a speculative areana might just have missed out on an important point: The market’s huge enough for everyone and for investors looking to make long-term investments, opportunities are bountiful.

Here is why the stock market should always be a major part of an investor’s asset allocation.

Liquidity

Equities, or more commonly known as shares, are one of the most liquid asset classes. In case of emergency needs, equity holdings can be liquidated within 3 days. Compared to an asset class such as properties where transactions can only be completed in a matter of months, equities allow us to invest with a peace of mind knowing that we have emergency cash within reach in a matter of days.

Transparency

Transparency is also a tremendous advantage for investors. All listed companies are required to comply with a strict set of regulations and disclosures. Companies will need to disclose to the public when any insider makes any transactions related to their shareholdings in the company, or when there are major mergers or acquisitions. Every company will also need to have its audited accounts distributed to the public yearly. Therefore, investors have easy access to information to help them make an informed decision about investing in most publicly-listed companies.

Potential for long-term growth

Most importantly, investing in shares of a company over the long-term gives investors real potential of seeing the company grow as time passes. Shareholders might also get huge returns from growing dividends.

For example, Riverstone Holdings (SGX: AP4), a medical and cleanroom gloves manufacturer, has seen its dividends grow at a compounded rate of 6.4% since 2009. OSIM International (SGX: O23), a major massage chairs and health product manufacturer has been able to grow its dividend from 1.0 Singapore cents since 2009 to 6.0 Singapore cents in 2013. This has helped OSIM’s investors since 2009 to obtain a really fast-growing yield-on-cost – that’s something which is not likely to be achievable with other asset classes such as properties for instance (it’s rare to see rents from properties increase by 6 times within 4 years).

Foolish Summary

Investing in shares require investors to have some basic accounting knowledge and a lot of patience. For those who are willing to wait and who are prepared to put in the effort, they might just be greatly rewarded in the years to come.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.