A good reason to invest in the stock market

yinka ogunlami

October 31, 2016 2:20 PM

Remember that there are things that we used to buy for ₦100 that can’t be bought even with ₦300 today in many situations. This is because of something called inflation.

A good reason to invest in the stock market

The gross loss that many people experienced in the wake of the stock market crash a few years ago may well have put doubts in our minds, but the thing is, the stock market recovers – it is a cycle called “market correction” (more on this in another post). So let me give you one reason to invest in it.

Remember that there are things that we used to buy for ₦100 that can’t be bought even with ₦300 today in many situations. This is because of something called inflation. Now imagine that I had ₦100 in 1990 and I had saved the money in a bank, well, we know that the interest rates would have been very low and it would have probably been better if I just spent that money straightaway – my personal opinion anyway.

However, depending on what we bought and based on an inflation rate of 7% per annum for example (we know that may not necessarily be the case today), we would need ₦581 to buy the same item today! This could easily be higher but let us just stick with that.

So back to the issue at hand, stock investing as defined, can be seen as a means for people to own a share (or part) of a company. One fact that has been generally agreed is that buying stocks (when done sensibly), is a good tracker or way of hedging against inflation - this is conventional wisdom.

Irrespective of what the market does, I mean the ups-and-downs, in the grand scheme of things, it is a good idea to invest some (not all) of your “free money” in the stock market because there is the potential of making significant profit from the market and this can serve as a “bullet proof vest” to inflation. Again, there is no age limit to investing in the stock market, in fact, the earlier you start the better, because at the end of the day, we are protecting our future, right?

However remember that, as with any kind of investment, you may lose the money you invest in the market since there is nothing that is really 100% guaranteed.

Keep investing,

Your Investment Analyst

yinka ogunlami