Stocks or shares represent ownership of the company. When you purchased shares of any company, actually you are purchasing the ownership of that company. Most of people have the question in their mind, why they should invest in stocks rather than other alternatives Risk free businesses available like invest in banks, Government Bonds and commodities. The return on stock market is greatly higher than banks, bonds and commodities. If you can tolerate risk then I advise you to invest in stock market to obtain better returns. What you are receiving from your bank investment. Let’s suppose bank is offering 10% interest rate per annum on your investment and inflation rate in your country is 15%. For Example
In 2014 You posses 1000rs
In 2015 You posses 1000rs + 100rs (interest you gain) – 150rs (inflation) = 950
It means that you are losing 5rs rather than receiving anything. So it verifies that you ought to invest anywhere else where you obtain more than 15% interest rate.
Three measure things that need to be focused while investing. Those are return, risk and liquidity. If we match up to bank and stock return, clearly overall stock return is greatly higher than bank return that is fixed. But there is no risk engages in bank investment whereas a massive risk involved if you invest in risky unstable stocks.
Stock exchanges in Pakistan:
Karachi Stock Exchange
Islamabad Stock Exchange
Lahore Stock Exchange