The Stock Market Doesn't Care

Why You Should Invest in Stocks

Because the stock market is an auction made up of buyers and sellers (including individuals, corporations, mutual funds, and more) of shares of publicly traded companies, fluctuations in stock prices is nothing out of the ordinary. In fact, the price of company’s stock can vary drastically from one day to the next. Before adding shares of stock to your portfolio, it is important to understand what causes stock market fluctuations and its risks.
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The market has endured its fair share of ups and downs over the years so this might seem like an oddly inappropriate time to suggest investing in stocks but, in fact, the benefits haven't changed.

What has changed—or needs to change—is the investing public’s perception of the stock market and its associated risks. Consider these five good reasons why stocks are still a viable investment and why you should continue to use them or invest for the first time.

 

The Stock Market Doesn’t Care

The stock market doesn’t care about you or your plans. It doesn’t have any agenda, and it could care less about yours. Why is this a good thing?

Because despite what you might have heard on late-night infomercials or read in an unsolicited e-mail, there are no magic formulas for investing success. The rich and famous don't have any well-guarded secrets up their sleeves, and there are no secret passwords or handshakes. In truth, there's nothing standing between you and successful investing except hard work and understanding the fundamentals.

Use Information Wisely 

Although institutional investors might have a decided advantage—they have more resources and more full-time professionals—you still have access to all the same information they do. You can lay your hands on the same data that makes them so successful. You just have to know what to do with it.

Risk and Reward

It might feel at times like the stock market is targeting you for disaster, but it's really not.

If you're caught on the bad side of the risk equation—the higher the risk, the greater potential reward, and the higher the chance for failure—that’s just the reality of investing.

The stock market is most dangerous when investors forget the risk-reward rule and expose their holdings to too much risk.

This is especially the case when they don't have a full understanding of potential losses. Investing in the stock market should be done with your eyes wide open. When you're blinded by a huge potential payoff or terrified by the thought of a loss, you won't make good decisions. Blame yourself, but don’t blame the stock market.

The Bottom Line 

So am I telling you to rush out right now and invest in the stock market? Absolutely not. I'm telling you to do your homework. Be realistic and use the information that's available to you to your best advantage. Understand the market—buy and sell "on paper" for a while as sort of a training session to see how you fare before you plunge in with both feet. And know that while the stock market can be an unforgiving mistress, investing can also be a lucrative endeavor. 

More to Think On

Other things to clarify for yourself are whether you're a trader or an investor and knowing the various types of stocks.