Why Buying shares is better than a Fixed deposit account

Posted by Felix Okoli on Monday December 23, 2013 at 15:45:32:

A share according to its name means buying a lot or place in a Company. When you buy a share from a Company, you are actually a stake holder in that Company. Shares are advertised in the Stock market and companies sell their Shares to raise money for expansion of their business.

A fixed deposit account on the other hand is an investment account with a specific amount invested at an agreed interest rate and tenor (time). Based on customer's instructions, at the end of agreed period (tenor), the investment can either be rolled over (re-invested) or liquidated (returned to customer) with the interest amount earned. A lot of people prefer opening a Fixed deposit account, because to them, it is less risky than buying shares this is true because of hoe volatile Shares can turn out to be.

This article would give your reasons investing in Shares is better than investing in a Fixed deposit account

Three Reasons Why Investing In Shares Is Better Than Fixed Deposit Account:
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- The interest rate of a Fixed deposit account is fixed: If you invest N100,000 in a fixed deposit account for an agreed interest of 15% per annum, what this means is that at the end of the financial year, you would be paid N15,000, no more no less. Many people prefer it this way because the 15% is not negotiated. But they forget that the person can make much more that just 15%, if He invests in Shares.

- Higher potential for Profitability: Due to the Volatile Nature Of Shares, Shares are more profitable: Shares are very volatile, just like Currency trading. This means that the prize of a Share can go very high today and come down very low the next day. Professional Stockbrokers turn this into an opportunity to make money profit within a short period of time. For instance, if they invest in any Shares at the prize of #5 per Share lot, and the Share price goes up to #9, they can quickly sell of that Shares and invest both the profit and capital to another prize which they expect to rise within a short period.

- Dividend of Shares is paid for as long as you Are the Holder of the Shares: Once a Share is bought, you are expected to profit from the yearly Dividend from the Company, as long as you are still the owner of the Shares and even when your are dead, some Companies transfer your dividend to your Next of Kin. A single investment can make you profit over and over again. But in a Fixed deposit account, you are to be paid the agreed interest rate at the end of the tenor. When the tenor is past, you either close the account or you are expected to come and renew such agreement with a new set terms and condition.

So from all indications, it’s much profitable to invest in Shares than investing in a Fixed deposit account. Though Shares can be very tricky and volatile, but it can be turned to an advantage by a Professional. And the long term profit of investing in Shares is an added advantage.