Should you invest in stock? For some people, buying stock may sound like something that is only available to the wealthy or that takes a lot of time and energy. Others may imagine that it is too risky. There is a little bit of truth in each of these—for example, there are certain stocks for which the share price is high enough that you need to have a substantial amount of money to purchase any—but they are not really accurate. Stocks can be a good investment for many people, but it’s important to keep the below considerations in mind as you decide what kind of investor you want to be.
Your Interest Levels
You can essentially be as much or as little involved in your stock ownership as you like. Many people own stocks as part of a diversified portfolio that includes mutual funds, bonds and other vehicles and rarely think of them except when they get statements or perhaps not even then. On the other hand, you may discover both a passion and a talent for following the market closely. Somewhere in between might be the dilettante who enjoys making an occasional investment in a company that interests them. This can turn out to be very lucrative; imagine if you’d done so with a company like Amazon or Google in the 1990s. On the other hand, it can just as easily be a bust as anyone who remembers any of the companies that had brief forays into social media in the mid-2000s can attest.
Your Cash on Hand
You don’t need to have $10,000 or even $1,000 to get started. You can start with $100 or even less. However, this might be a good time to take a look at your finances in general and see if there is cash you can set aside to get your money working harder for you. For example, if you took out several student loans when you were in college, you may want to do some research on consolidation. This could simplify your repayments so that you are only billed once a month under a single interest rate, which might even be more advantageous for some loans. You might also be able to cut back on your spending and put that money toward investing.
Understanding Investment and Risk
Conventional wisdom says that if you are investing for the long term, your best approach is to sit tight and not get too worried about market fluctuations. Even large changes are to be expected over a period of decades, but in the long run, your stocks will most likely earn money. However, you may want to be a more active type of investor. In this case, when thinking about risk, remember that it is not just about how much you lose but how much you are able to lose. You may want to make sure that money earmarked for riskier investments is money you can afford to let go. Retirement funds should go into safer vehicles unless you are young and have plenty of time to make up any losses that you suffer.