If you have never been tempted to buy and sell stocks the only reason I can think of is that you never had any savings. You must have fantasized about your stock picks rising 100 fold and you buying all those dream luxury necessities of life and living happily ever after.
I have only read about people who has made a fortune out of stocks. Only people I see making some reasonable amounts of money in the Stock market are salesmen who call themselves investment advisors. They convince people like you and me to buy and sell stocks and make a fortune in commissions.
If you can’t make millions in the stock market why should you invest in them?
Over a long period of time stock market pays twice as much as any other form of investment. Over the last 100 years risk-free long term bonds have returned about 5% a year. Stocks of big companies have averaged about 10%. The best part is that you do not need to know all the technical terms and the state of global economy to make that money. There is an easier way to invest in stocks through mutual funds.
Investing in stocks through mutual funds
If you are a beginner you should buy stocks within a mutual fund. A mutual fund is simply a pool of money managed by professionals who invest it into various stocks.
Advantages of a mutual fund:
1. Mutual funds allow you to spread the risk of investing in stocks by buying into a bunch of stocks rather than picking just a few shares in one company. For an individual with his limited resources it is very difficult to pick up many different stocks from different sectors. A mutual fund does this job for you.
2. Mutual funds keep track of all the paper work for you. You do not have to stare at a bunch of statements from companies, proxies, dividend checks, tax forms etc.
3. Mutual funds come with a team of experts who do the research and pick out the best companies to invest in. They keep track of the markets, money flow, monetary policies, industry trends, recession, inflation, liquidity, market sentiment and what have you.
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