How to Get More People to Trade on the Stock Exchange
- 1). Explain the costs of avoiding the stock market. Particularly for young people, investing in the stock market is usually much more profitable than putting that money into savings accounts or other conservative investments. Over time, compounding--the process by which an investment appreciates due to exponential growth--can create substantial wealth, even from relatively small initial amounts. Inflation--the general increase in prices over time--also erodes the purchasing power of money over the long run, making it important to invest saved money.
- 2). Discuss methods for protecting assets kept in the stock market. This includes diversifying the portfolio (spreading investments around assets that have non-correlated performance), using stop-loss orders (orders that automatically close a position in a security if the value of that position declines), and avoiding excessively risky asset classes, such as penny stocks.
- 3). Teach how assets should be allocated depending on the age of the investor. In general, young people should invest more of their funds in riskier (but more likely to appreciate) assets like growth stocks and technology. Older people can be better served by conservative stocks that pay dividends, such as blue chip stocks.