Category: Investments


Is Investing in Stocks and Shares too much of a Gamble?

Many people successfully invest in stocks and shares but there are others that have lost a lot of money doing this. This is why there are so many people that feel that it is too risky and would rather not. However, there are some circumstances where you can increase your chances of doing well on the stock market.

Although there is no magic formula for choosing the right stocks and shares to invest in, there are some things that you can do to improve your chances of getting a good return on your investment. The first are general things with regards to all investments. It is important to realise that investments are very different to savings in that you are buying something with your money, in this case shares. The value of that item changes all of the time depending on demand for it and therefore there are upward and downward fluctuations in price. This means that if you sell it quickly after purchasing it, there is a chance that the value will have gone down and you could end up getting back less money that you paid in. This is why it is always advisable to invest in something for a long time period, usually at least five years, in order to protect yourself against these price fluctuations and give yourself a better chance of getting a decent return on your money. However, there is always a chance that you could lose some money; if not all of it and therefore it is wise to make sure that you only invest money that you can afford to lose.

Whether you think that stocks and shares are worth the risk will very much depend on your attitude to risk. You might have some spare money that you do not think that you will need for a while and feel that it will be better for you to invest it, rather than save it to give yourself a better chance of making a significant return from it. There are some investments which will be riskier than other. It t ends to be the case that the riskier the investment; the better the chance that you will make a bigger return from it. This means that if you do not like high risk, you could invest in a lower risk investment and still make some money back, but if you do not mind taking a risk then you could invest in something riskier and give yourself a bigger chance of making a good return. There is no guarantee of course, they may not behave as expected.

There are lots of different ways to invest in the stock market as well. You may want to just buy shares in one specific company, which is a risk as if that company value falls then you could lose money. To reduce the risk, some people would rather invest in a group of companies. This could be a particular industry sector or a spread across many sectors. This reduces the risk because if one company does badly then the others may be able to offset that reduction in value. If you are just in one industry, it does not reduce the risk so much as there could be something happen that affects the value of the whole industry.

Like everything, it is worth finding out as much as you can before you invest in the stock market. Research trends and look at how certain sectors and specific companies tend to perform over time. Talk to people who have stocks and share and ask them for tips on making money from them. There are also websites with information that you might find useful as well. If you do not have the time to do all of this research then it could be wise to talk to a financial advisor. They will be able to help you to make a decision based on the amount of risk that you want to take and explain all of your options to you. They will also have all of the necessary information at their fingertips so you can get going quickly rather than having to wait until you have done the necessary research.