Stock Market Investment: Could it Be Right For Me?
As our title suggests, you are likely wondering whether the stock market might be a good fit for you. Perhaps you have previously felt stock investment was intimidating or irrelevant to your skillset. You might have looked into investing in the stock market in the past but backed away due to unfavourable stories you might have heard. It’s time to dust away the cobwebs of those rumours to reveal the truth of what investing in the stock market involves—and what it doesn’t.
“What is a stock market, exactly?”
Essentially, stock markets are where individual and organizational investors draw together to buy and sell company shares in one space. Each ‘share’ value is determined by demand and other contributing factors, such as the company’s potential prospects. Historically these spaces were within public venues and conducted entirely in-person or over the telephone. Now, these exchanges exist primarily as electronic marketplaces.
Hollywood movies depict stock market investors as crazed packs of wolves on a hunt. Bright office lights and hysterical investors yelling into telephone sets while standing atop desks are the key stereotypical image. There might be some truth in this imagery in some corners of history. But it is simply not the reality for the most part. You should not feel intimidated—there is space at the investment table for you!
“I have no idea where to get started!”
If the thought of stepping into the financial area of stock investment fills you with fear, then you are not alone. For individuals with no prior experience, the stock market can appear to be an inaccessible option. Investment of any kind carries some potential risk, but this does not mean it is not a potentially fortuitous venture. It can be one of the most efficient ways to build personal wealth. Understanding the system is the first rung on the ladder to achieving success.
Hit the ground running by educating yourself about the mechanics of the stock market. Reading articles such as this one is a great place to start. Spend time talking to a trained and qualified financial adviser. Before a cent of your money leaves your account, ask about all of the options that might be open to you. Establish the kinds of risk that could be involved and discuss how comfortable (or economically able) you are before parting with your money. Great financial advisers are always worth the investment—the stock market cannot promise the same.
“I am seriously considering investing—what are the pros and cons?”
Here are the core essentials of stock market investment that you need to know about:
PROS
Easy to get started — Stocks can be easily (and instantly) bought through a broker or via an online platform. You can buy stocks as soon as you would like to. Please do not confuse being able to buy stocks with being ready to buy them. You need to ensure you have done your research. You can sell your stocks as soon as you wish to which can be reassuring for a beginner. You might get a significant return from a short ownership period. Or you may make back the money you invested. It all depends on the health of the market and the interest in the stocks you have to sell.
One step ahead: Historically, the value of stocks boast an annual return potential of over 10%, which supersedes that of inflation. In this way, you are one step ahead of the inflation rate while you are investing. Further to this, you can protect your original investment by holding on to stocks if the market were to drop and the value of what you own declines for a period of time. If you can afford to, keeping invested for longer can pay off later when the shares offer a greater yield.
Independence: Working for yourself and avoiding the usual office rat race is becoming an increasingly attractive option to modern professionals. Many of us would prefer to work to our timetable, and within the environment we choose. Suppose you become confident in your stock investment skills and abilities; in that case, you could remove the need for a typical office job. In fact, you could work from anywhere in the world that you desire.
CONS
Risk of loss: The stock market can be volatile. It can change rapidly and without warning. Returns of any measure are never guaranteed. You might carefully research a particular investment option. Still, then unforeseen circumstances transform the market, which causes you to lose the capital you pledged. This is a genuine risk and not one that can be proven against. However, great financial advice from the right professionals can help to reduce potential risk significantly.
Emotional tax: For some, knowing where your money is coming from and when is a reassurance worth more than the dollars it represents. Suppose you are risk-averse and prefer to live a more reliable and secure lifestyle. In that case, a stock investment might not be the best option for you at this point in your life. Mental health is paramount. Our emotional balance cannot be bought out or replaced. Do what’s right for you.
Research time: Impulsive investment in the stock market rarely pays off. Diversifying your investment portfolio can help to reduce the risk of a total wipeout loss of investment. Once again, this is where a professional financial advisor can be a fantastic decision-making asset.
The best way to know if the stock market is a good fit for you? Speak to someone who can impartially and expertly guide you. Financial advisers are the asset you need to thrive.
