Nowadays, many well-earning developers wonder whether or not investing in stocks is worth all the hassle.
Unfortunately, at the same time, most software developers still don’t know much about finance and investment in general, and the stock market specifically.
Even the developers, who joined early-stage start-ups or big tech companies and got proper compensation in stocks, don’t know how it will benefit them in the future.
Stocks increasing your capital
If you can save regularly and invest wisely over a long time, you can grow your capital enormously.
However, you shouldn’t invest if you are financially broke. Make sure before that your financial situation is in great shape, that you have an emergency fund to cover around three months of expenses in case of any emergency.
It can also be useful to learn how to free extra monthly cash from your dev-salary for investment, so you can spend less and invest more.
Most investors find long-term investments always beneficial for their capital.
For example, investing in high-growth new-on-the-market stocks may seem and certainly can be a great way to build wealth. Despite that, it’s wise to make an investment portfolio with the shares of established and grown companies.
The most convenient and unmistakable approach to growth capital in the stock market is to buy company shares with great businesses for reasonable prices; hold them as long as they remain doing great businesses.
Another impressive thing about stock investment, that your investment assets are liquid. You can sell them anytime and get your money back to your bank account.
Stocks growing historically
It’s not a secret that there are bad and good times for stock investment.
Last year, there was a stock market crash and have been market crashes, pullbacks, and periods of lousy performance before, and they will be in the market later in the future.
And still, the US S&P 500 has historically produced 10%-11% before inflation or 7%-8% after inflation, and you can easily access it through your online broker or bank account.
Historically, small-cap investing has proved to be much more beneficial than in large caps. Some small-cap companies can become large and highly profitable companies in the long run, like in 10-20 years (along with the digitalization and tech startups, it can take even 5 years).
So if you decide to buy such stocks and hold them for a specific period, you might make a lot of money at the end after selling them or by keeping to collect dividends from them so far as the company decided to pay them off.
Stocks keeping investment value
Indeed, stock prices can change, for example, when the market is volatile, even when the actual company stock value has remained the same.
Because depending on the market and its demand, stocks go through higher and lower periods that lead to substantial price fluctuations.
But that doesn’t change the fact that you are getting for your money.
As an investor, you are willing to buy stock shares at that “discount” compared to how the market values them. So in return for buying and then holding these value stock shares for the long-term, you can be rewarded handsomely.
Stocks diversifying your investment
Diversifying means investing across different stocks to mitigate loss risks.
If you invest all your money in a single stock or depend on a particular sector or invest in specific assets, the chances are high that you might lose all your money if those stocks don’t perform well.
Reduce your risk when seeking returns.
To balance out the losses and continue to make money, you must diversify your investments in stocks and not only in them.
If you have an investment portfolio that is permanently diversified and regularly rebalanced, you will not have periods of high losses nor high gains. Instead, you will get more steady capital net growth over the long term.
The number of stocks you should hold linearly depends on the needs to meet your investment objectives and goals.