Like anything, the stock market has a variety of advantages and disadvantages. The advantages we're going to explore include the instant availability of funds, elimination of dishonesty and protection against default.
The importance of this the instant availability of funds on virtually a moment's notice can hardly be overemphasized. In almost no other type of investment outlined in this article can you get your money as soon as you need it. In many cases you have to nurse along a poor credit for years and finally foreclose on him. The stock market provides almost instant availability.
I will remember my first realization of the liquidity of the market. A friend of mine, a broker, decided to sell a large block of stock worth well into five figures in order to take advantage of an opportunity to invest in something else that he felt would rise in value within a day or two. He placed his sell order and we watched the ticker tape.
In about five minutes his sale was recorded together with the price. The sale actually took place in New York on the floor of the New York Stock Exchange even though we were sitting in Washington. The price at which the stock was sold was about $.25 per share under the previous sale and could be pretty well forecast. To get your money when you want it and to get it out of an investment that you do not want can be all-important.
The entire field of time sales finance is riddled with dishonestyon the part of the borrowers and on the part of the dealers. You must always be on your guard against it and the stock market is a good way to get rid of this element of dishonesty. Otherwise you may well end up with nothing. In the stock market you do not run this same risk.
The chance of any firm on the New York Stock Exchange or American Stock Exchange absconding with your money is almost negligible. Individuals in these firms, of course, are not above embezzlement, but their thefts usually cannot materially reduce the value of your stock. Sometimes "over conscientious company men" may cause you a loss by rigging the prices of electrical equipment and other things so as to bring on antitrust suits, but these actions are not thefts of funds you have entrusted to the company.
In sales finance, defaults are common and must be allowed for, but the stock market affords individual investors little possibility of being caught in a default. The larger portfolios of investments in mortgages, sales contracts and the like always have losses, and these can often be predicted as to percentage of outstanding loans each year. The smaller the portfolio you have the more unpredictable are the losses.
You may go on for years and have no losses. Suddenly $20,000 may disappear. The borrower has defaulted. In the stock market you do not have this risk. Even on the bond market, defaults are not too common and can often be predicted through the study of published records. This risk of default is largely eliminated by investing in stocks of major corporations.
In summation, although the stock market is risky and intimidating to many new investors, it can actually be a safer bet than investing in a building and loan association and it can give a much greater return than putting your money in a savings account at the bank. If done with caution and care, investing in the stock market can result in large returns and a very jolly bankroll.