The finance world has a great abundance of choices today if and when you decide to invest. If you thought that the simple decision to put some money to grow would be easy, you will be in for a surprise. Investing in mutual funds, exchange-traded funds, bonds, stocks, currency, oil, futures, derivatives and other financial instruments all come with pros and cons and there is no sure fire formula to win it all. Today we want to cover the main reasons why you should (or shouldn’t) invest in the stock market.
– Volatility. Due to the fact that you are essentially buying pieces of a certain company or sector, the winnings you can achieve are theoretically endless. The price of a certain stock can double or triple over a certain period of time.
– Liquidity. With the exception of stocks which have a low trading volume, it is fairly easy to get out of any trade you want. Almost at any given time, you will find buyers and sellers in the market for any stock instantly. Real estate, for example, is an illiquid investment. Stocks are a very different story.
– Abundance of choices. You can trade any company which is publicly listed, and there are thousands of them. Building a portfolio is easy and you don’t have to invest in what you don’t understand. Some industries have proven to be good bets for the past 40 or 50 years. Why shouldn’t they remain like this?
– Volatility. Again. While volatility can bring substantial rewards in terms of income or dividends, it can also cause your stock price to plummet quickly and lead to great losses. Swings in the stock market can be wild, as many investors already know, and if you think you don’t have the stomach to digest them, maybe staying away from stock trading is a good idea.
– Time-consuming. Pressing a button to buy or sell a certain stock is easy. Picking the right stocks is not. Learning stock picking strategies and researching a company’s results in the past years takes time, effort and good financial knowledge. If you’re not up to the task of investing time into stock trading, you might not be as profitable as you’d want.
Of course, a discussion regarding whether you should or shouldn’t trade the stock market can be a lot longer and can go into very rich details. The basics above are just something you should know before deciding if you should continue learning about this market or should you divert your attention towards other instruments.