Why should a trader choose to trade shares?
Profit Potential
Engaging in share trading holds the promise of substantial profits. When the value of a company’s stock rises, traders have the opportunity to sell their shares at a higher price than their initial purchase, thus realizing a profit.
Diversification
Participating in share trading enables traders to achieve portfolio diversification. Through the ownership of shares in numerous companies spanning diverse industries, traders can effectively distribute risk and mitigate the influence of individual company performance on the overall health of their investment portfolio.
Liquidity
The stock market is typically characterized by high liquidity, signifying that shares can be readily purchased or sold at the prevailing market rates. This facilitates swift entry and exit from positions, proving advantageous for traders employing short-term trading strategies.
Access to Publicly Listed Companies
Engaging in share trading offers investors the chance to possess a portion of publicly listed, well-established, and prosperous companies. This opportunity is frequently unavailable when dealing with private companies.
Dividends
Certain companies distribute dividends to their shareholders, which constitute a portion of the company’s profits. Dividend payments can serve as a consistent source of income for traders, particularly those who favor a more long-term investment strategy.
Speculation
Proficient traders skilled in assessing market trends and company performance often participate in share trading with a speculative motive. Their aim is to forecast short-term price shifts and capitalize on these price fluctuations to realize profits.
Hedging
Share trading can also serve as an effective hedging strategy. For instance, an investor who holds a significant quantity of a specific stock might utilize derivatives to mitigate the potential for losses.