Stocks are often one of the first things many people think of when they hear the word investments, but there are advantages and disadvantages to stocks as investment vehicles.
Below are a few things to consider if you want to get into this type of investing.
Day Trading
If it interests you, day trading can be a lot of fun and potentially lucrative. You can review a guide for learning how to day trade to get started.
You might think that day trading is only for wealthy people, but that isn’t the case.
You can get started with $1000 or less.
The caveat is that this does need to be money you can afford to lose because day trading falls into the high-risk, high-reward category.
You can lose a lot, but you can also make a lot.
Risk
In fact, for some, the risk factor of the stock market is a negative.
Over time, a portfolio of stocks tends to increase in value, but of course, companies do drop in value and go out of business sometimes.
Savvy investors protect themselves from these types of occurrences by diversifying, but if you are someone who tends to watch the market a lot and worry about every little movement, you might find most stock investing too stressful for you.
Ease of Getting Started
One of the great things about investing in stocks is that it is very accessible.
This wasn’t always the case.
Once upon a time, you had to go to a broker who could do it for you, but the internet has been a leveler, making it easy for you to sign up for a brokerage account and get started.
You don’t have to know much about the market, either, since you can have a roboadvisor assemble a portfolio for you based on your preferences.
The Long Game
For some people, the fact that stock market investing works best as a long game is a disadvantage.
If you are young and you want to retire as a millionaire, start investing now and you can probably achieve that.
If you’re nearing retirement, however, or if you want to ensure financial capacity to pay for college, or get-rich-quick, you may be disappointed in the returns from the stock market.
Many can and do make a lot of money on it in a short time through day trading, but the more conventional approach is the slow and steady one.
Stay on Pace with Inflation
Another great advantage of investing in the stock market is that your money keeps pace with or outpaces inflation.
There may be safer places to park your cash, but the problem with them is that your money does not acquire very much value.
A money market account is a good example of this type of vehicle.
It’s better for an emergency fund because it is easy to liquidate, but you won’t make money on it.
On the other hand, investing in stocks for your retirement can increase the likelihood that as inflation and overall living costs rise through the decades, the value of your money will as well.
Read: How to Invest in the Stock Market for Beginners
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