Investing* in stocks for the long run has been widely embraced all over the world as a way to grow wealth. The U.S. stock market stands as a hub of opportunity, offering a wide variety of investment possibilities in well-known companies, including household names like Apple and Tesla.
The potential rewards of investing in stocks are exciting, especially with the possibility of long-term growth and the idea of financial freedom. Yet, it’s still important to understand that there are risks associated with any investment. Returns aren’t guaranteed just as markets can move up and down without any prior forecast.
But for those who have a long-term investment mindset and use the right strategies, stocks can offer the possibility of achieving substantially higher returns than many other investment options.
These days, it’s never been easier to invest in stocks, regardless of where you are in the world. And with that in mind, the United States stands out with its expansive and well-established stock market, making it the go-to choice for many investors.
Here’s why investing in the U.S. stock market could be ideal for you if you’re looking for long-term growth:
1. A large stock market filled with reputable companies
U.S. stocks are backed by some of the most well-established companies in the world, providing a measure of stability and security, which investors trust. These companies have been around for a long time and are more likely to stay dependable for the foreseeable future.
The S&P 500 index includes 500 of the largest U.S. publicly traded companies, often referred to as “blue chips”. This index is known for historically delivering reliable and secure returns. The average annual S&P 500 returns have been around 10% for the last 100 years. If you’d invested USD 10,000 around 30 years ago, your investment would have multiplied to over USD 170,000 today.
One can also consider the S&P 100, which is a subset of the larger S&P 500. This group was designed to track the performance of large-cap companies in the United States, and it consists of 100 prominent companies spread across various industries.
2. U.S. stocks have strong regulatory protections
The U.S. boasts some of the strictest regulations globally, and its stock market undergoes regular audits to ensure full compliance with regulatory requirements.
This gives investors a greater sense of security, knowing that the underlying companies they’re investing in are being monitored and overseen by regulators. Publicly listed American companies are also obligated to publish their financial statements every quarter (or even more frequently than that). This means you can see exactly how well a listed company is performing at any given time.
3. Stock market investing can protect your wealth against inflation
Having some stocks in your portfolio historically provides good protection against long-term inflation. This is because companies often experience an uptick in revenue during periods of high inflation, which helps protect your savings from losing value. Investing in U.S. stocks allows you to tap into global economic growth, with stronger economic cycles mitigating the impacts of others that are doing poorly.
4. Owning certain shares allows you to collect dividends
Holding shares of a publicly listed company means you retain ownership in a small portion of that company. This can make you eligible to receive cash dividends, which is cash that’s paid from the company's profits. When eligible, you don’t need to do anything to receive the dividend — it will just appear on a given date in your account. But you should be aware that not all stocks pay dividends, and you should do your research to see if you can receive such payments.
5. U.S. stock markets offer diversification
Owning U.S. stocks is a great way to diversify and create a portfolio that spreads out your risk. By having the opportunity to personally select stocks from a wide range of companies in the S&P 500 (or 100) index, you can potentially reduce investment risks by owning stocks from a variety of industries. This means that poor performance in one industry will not negatively impact your overall assets.
6. The freedom to buy and sell quickly
Liquidity refers to how easily you can buy or sell an asset without significantly impacting its price. When thinking about investing, high liquidity is an important factor that can impact an investor's ability to enter or exit an investment. Unlike other types of investments, like real estate, for example, publicly listed stocks are very liquid.
This means you can easily buy or sell them at any time during market hours, making them highly accessible and convenient. With stocks, you have the ability to invest within minutes and quickly convert them into cash when you need to.
7. You can start small with fractions of stocks
Investing in certain stocks can be expensive, but there's a way to make it more affordable. Fractional investing lets you buy a smaller piece of stock at a lower cost. For example, you can purchase one-tenth of a share for one-tenth of the cost. With fractional investing, you can invest in shares for as little as USD 10 and sell fractions worth as little as USD 1.
You fully own these fractional shares, and they entitle you to all the benefits of ownership, including dividend payments proportional to your fractions.
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*Capital at risk. This information is not investment advice. Security values can go up as well as down. Past performance is not indicative of future results.