The simple answer to the question, ‘Why trade shares?’, would be a straightforward one. The reason people trade shares is ultimately to make money. Whatever the market you choose or the method of trading you opt for, if you have the right skill set, then trading may be an extremely lucrative occupation.
In financial terms, those who successfully invest in shares could hope to see a return of around 50% on their original capital. Clearly, compared to simply placing your savings in a bank, where returns are between 1% and 5% per year, trading is a more attractive aspect. However, returns are never guaranteed on shares and you could lose all of your investment.
People also choose to trade shares in times of financial uncertainty, as a way of trying to make or protect capital. For instance, some people might view a recession as a good time to start trading shares, using techniques such as shorting, as the volatility of the marketplace creates opportunities for profit. Again, experience and knowledge are required in equal measure if a trader is to even have a chance of succeeding in such circumstances. Trading is not a guaranteed way to make money, so traders should always have a back up plan in case a trade goes awry.
As well as the financial advantages to trading shares, there are many other reasons why people choose to engage in this occupation, either as a hobby or a full time occupation. The excitement of seeing trades pay off, and the thrill of waiting to see how trades pan out, appeal to those who enjoy such sensations. In addition, thanks to the nature of the internet, it is perfectly feasible to trade shares from the comfort of one’s own home. So, there is the opportunity to be your own boss, a factor which lots of people like.
We should note at this point that there are also significant tax advantages whilst trading shares. In the UK, traders are allowed £9,600 in capital gain tax allowance on their profits. This means you can make up to this amount of money without having to pay any money in tax!
If you are not sure as to whether trading is an option which suits your lifestyle, it is worth doing some research around the subject. You may find a great deal of helpful information on the internet and you might also like to speak to a share dealing brokerage for further information about the trading process. It is probably a sensible idea to think carefully about how much money you would want to invest in shares, and to bear in mind that with any form of trading there is always a chance that you could end up losing money.