advantages and diaadvantages of Shares?

Answer 1

Advantages:

1. if you pick shares of good companies you will on average earn about 10% to 13% annually tax defered until you sell. Then the tax rate is less than the normal tax rate if you hold the shares long enough. Shares in good companies will stay ahead of inflation.

2. dividends receive a lower tax rate than interest.

3. There may be a 3 but I can not recall it.

Disadvantages:

1. It can be diificult to pick good companies to buy shares in. Many people do not and wind up loosing a lot of money.

2. People many times buy shares in good companies and when the price of the share double in price they bail out instead of standing pat.

3. What can appear as a good company may turn into a real dog.

4. The stock market might collapse and the value of your wonderfull shares drop by 30%, 50% or more.

The disadvantages outweigh the advantages 4 to 2. But shares in general still have proved good investments. Diversification mitigates items 1 and 3 of the disadvantages somewhat. Item 2 is the one you have to watch out for the most. Item 4 offers a chance to really make a killing if you have a cash reserve.

Answer 2

The advantage is that they will probably go up faster than you would get in interest at a bank savings account.
The tax treatment is also favourable.
The disadvantage is they are not guaranteed so you could also lose money (bigger risk that a savings account which is why you would expect a better return)

Answer 3

u can earn a lot of money and lost a of money overnight as well.