If you want to counteract demographic change and the problems of the pension system independently and build up long-term assets, there is no getting around a broadly diversified investment portfolio with equities. Equities sometimes offer the best opportunity to participate in global economic growth and earn an attractive return in the long term. We show seven reasons why investors should definitely include shares in their portfolio.
1. High potential returns
Shares are one of the best forms of investment for building up long-term assets over decades. A positive return is essential to counteract the loss of purchasing power due to inflation, to be able to pay taxes later on and ultimately to close your own pension gap. Historically, the stock markets have achieved an average annual return of 7 to 10 % over the last five decades, clearly outperforming pretty much every other asset such as savings accounts, call and fixed-term deposit accounts and even bonds.
The reason: while cash and fixed-interest investments lose value when prices rise, equities offer the opportunity to keep pace with inflation, as companies then also charge higher prices for their products – they simply pass on their increased costs to the end customer and can still increase their profits, which they can distribute in part to their shareholders.
2. Participation in the company’s success
Of course, companies not only regularly adjust their prices to inflation in order to continue to cover their costs, but also always create added value. They develop products and services that make life easier for all of us or help us to avoid having to do things ourselves. Only when a company is able to meet demand with its offerings does it generate a profit for our society. Anyone can participate in this success. Anyone who buys shares automatically becomes a co-owner of the company and provides it with additional money so that it can continue to grow.
This means that shareholders participate directly in the company’s success and can participate in the share price performance through their purchase or are compensated in the form of dividends. Many established stock corporations pay regular dividends, which represents an additional source of income for investors.
3. Simple diversification of the portfolio
Buying just one share exposes your money to high risk, as you are putting all your savings on one card. One of the most important rules when investing is therefore diversification. If you spread your money across different shares and therefore invest in different companies, which in turn are active in different sectors, markets and currency areas, you minimize your risk. As shares can be bought piecemeal and conveniently acquired via an automated savings plan, they offer an excellent opportunity to diversify your portfolio as much as possible.
4. High liquidity
Shares are one of the most liquid forms of investment of all. While the money in fixed-term deposit accounts or bonds is tied up over a longer period of time, shares can usually be sold within seconds and the money transferred to your own bank account. For every buyer, there is almost always a seller as a counterpart. More than 150 trillion US dollars are traded on the stock markets every day. This flexibility is important in order to be able to react quickly to unexpected events. Be it news affecting the company or unexpected everyday expenses that suddenly need to be covered.
5. Manage assets from anywhere
If you invest in shares, you can manage your investments from anywhere with an internet-enabled device. This is not the case with every investment – especially real estate. They can’t just be rebuilt at a different location, and any changes of tenant only work on site. You are much more flexible with shares.
6. Low entry barriers
To invest in shares, all you need is a broker with access to the stock exchange, such as Scalable Capital*. You can trade there completely free of charge as part of a savings plan for as little as one euro. A lot of capital is not necessary, even with broad diversification. However, you have to decide for yourself which shares to buy. However, you can find some suggestions and tips on the Internet – such as on this blog. Building your investments on your own consumption is certainly a good place to start: Apple, McDonald’s, Starbucks, Telekom, Allianz, Nike, Vonovia, Tesla, Marriot, Unilever, Procter & Gamble, LVMH, Take-Two, Shell or Amazon* – they have all performed well over the decades.
7. Additional income
Investing in shares allows you to benefit not only from price gains, but also from dividends. Even if the latter should always be reinvested and not withdrawn from the portfolio, especially at the beginning of asset accumulation, they will generate additional income over time. You are effectively letting others work for you. From a certain portfolio size, large sums can quickly accumulate, which can bring you step by step to financial freedom so that you can later live carefree in retirement or perhaps even retire a few years earlier. In any case, they ensure financial stability in life sooner or later. Every time you buy shares, you can buy additional income.
Conclusion
Equities offer a number of advantages that make them an indispensable component of any portfolio. They enable long-term growth, diversify risk, offer liquidity, allow you to participate in a company’s success and protect against inflation. Whether you are an experienced investor or a complete beginner, shares should always have a place in your portfolio! With a well-thought-out investment strategy and a long-term perspective, anyone can benefit from the advantages and build up a sustainable fortune!
- Buffett, Mary (Author)
Letzte Aktualisierung am 2025-03-04 at 20:11 / Affiliate Links / Bilder von der Amazon Product Advertising API
