Investing in the stock market can be both very risky (because you can lose the money invested) or very rewarding (because you can earn multiples times your initial investment.) This article explores both of these.
There are some ways of investing that are much riskier than others. The main risk is that you never know what is going to happen. On any given day, the stock market could take a dive and your portfolio could go up in flames. Of course, the market usually recovers to a certain level, but even then you could lose a lot of money along the way. And to make things even more risky, the more money that you invest the more money you stand to lose should something bad happen.
It is also risky to invest in stocks if you do not know what you are doing. Many people have heard the stories of getting rich this way. In turn, they think that the process is easy and dump all of their money into it. Just like anything else that has to do with investing money, there are huge risks putting money in the stock market. The bottom line is that you should start out with small investments if you do not have a lot of trading experience.
On the other hand, the rewards can greatly outweigh the risks if you know what you are doing.
The main reward of investing in the stock market comes in the form of money. If you pick the right investments, it is safe to say that you can make a lot of money both in the short and long term. As you begin to learn more and more about investing, you will find that choosing the best stocks becomes simpler. This is not to say that you will easily make money, but you should get a feel for what is right and what is wrong. And don’t forget that in the long run the stock market return is always around 8-10% so even temporary hiccups such as the dot com bubble bursting in the late 90’s can easily be avoided if you are careful and play it smart.
Another great benefit is the fun factor. Sure, you could store away your money in an online savings account, but what fun is that? When you get involved with the stock market you will feel as if you are giving yourself the best possible chance of hitting it big. And with so much on the line, you will definitely be excited each and every time you check the progress of your investments.
There are some risks and large rewards associated with investing in stocks. If you are careful then you can minimize the risks and maximize your rewards. What are you going to do with your money?