Stocks can be said to be a popular investment product today along with the increasing awareness of the public that saving money in savings does not bring added value to the money they have. This awareness has also triggered a shift in people's lifestyle in financial management from the "Saving Society" to the "Investment Society".
Indeed, stocks are the most profitable investment product compared to other financial products such as deposits, mutual funds and bonds, or commodity products such as gold, land, and even forex. Imagine that in a period of 10 years, our JCI generated a yield of 398%, the highest in the world.
However, when talking about investment products, whatever it is, then we must remember a rule that the higher the potential profit generated by an investment product, the higher the potential risk faced. High Return, High Risk.
If there is an investment product that offers high returns without risk, it is certain that it is a fraudulent investment. Stock investment is not a fake investment. Share transactions are carried out on the Indonesia Stock Exchange (IDX) and are directly supervised by the Financial Services Authority (OJK). Even in stock trading, there are actually various risks (potential losses) that we should know about. What are the pros and cons of stock trading?
Advantages of Stock Trading:
Has the right to participate in the GMS and is recognized as the owner of the company.
Owning shares means we own a company where as owners we have an obligation to determine the company's leadership and corporate strategy carried out at the General Meeting of Shareholders (GMS), also entitled to the profits generated by the company, this benefit is called dividends.
Has the right to receive dividends from every share owned.
Dividends are distributed evenly among all shareholders according to the shares owned. The more shares you own, the greater the total dividend you will get. However, dividends will only be distributed when the company whose shares we own get a profit and in the GMS the majority of shareholders agree on dividend distribution.
Potential gain from the difference between the buying and selling prices.
The more profitable the company is from time to time, the more its share price tends to rise. This increase in price is often used by trades to sell the stock at a higher price than the previous purchase price, so that the trade benefits from the difference between buying and selling prices, this is what is called a gain.
Stock Trading Risks:
Not getting dividends.
But what if the company loses? This is one of the risks of owning shares, that is, the company does not pay dividends due to losses. Losses will not be distributed to shareholders like dividends, but losses will erode capital which ultimately has a negative impact on the company's financial condition.
Potential loss from the difference between the selling and buying prices.
If so, what happens to the stock price? There is a possibility that the share price will decrease because the company's business performance is not good. A decline in stock prices will be the second risk in stock trading, when we sell a stock because of its poor business performance at a price lower than the previous purchase price of the stock. This is called loss.
The company went bankrupt and received the share of the liquidation last time.
What happens if one company incurs losses from time to time? There is a possibility that the company will go bankrupt. Bankruptcy is the worst risk for shareholders, because as owners of shareholders have the last rights after the company is liquidated and the proceeds are used to pay taxes, employee salaries and debts.
So, by knowing the risks and advantages of stock trading, the trader must be wise in choosing which stocks to buy properly, not to buy a stock which actually gives a continuous loss.