There are many people that invest in the stock market and even more businesses that will do so. You may wonder whether you should do the same thing. There is a lot to think about though and it is worth considering a lot of different things before you decide whether it is the right decision for you.
Risk of Losing Money
When you invest on the stock market it is not like putting money in a savings account. There is a risk that you will lose some of the money that you put in. This is because you are buying a share of a company and the value of the share will vary depending on the value of the company as a whole. So, if their profits go up or down, this will influence the value. It will also be influenced by any activity happening in the particular business sector it is in as well as anything happening in the world generally. Stock market investors can be jumpy which means that if there is any sign that their shares may go down in value, they will sell them. If lots of people sell, this brings the value of all shares down as they are all less desirable and yours could come down too. If a company collapses then the shares may be worthless. Of course, most people invest across a number of companies and number of industries to try to avoid being impacted by crashes in certain areas but it is impossible to avoid a whole stock market crash.
Length of Time to Invest
As the stock market will naturally fluctuate up and down, you will find that if you leave money in for longer, then this will be outweighed over time. However, it can take a long time to outweigh these and it is often the case that this could take at least ten years. This means that you need to be prepared to not use that money for a long time. This is also a minimum time as if the stock market does have a crash after nine years you will probably have to wait more than a year for your shares to increase in value again.
Amount of Money Needed
You will normally need quite a large sum of money to invest. You might be able to use a scheme where you slowly buy small amounts of shares monthly, but normally you might need to buy a big chunk with a lot of money. It will depend on how you set up your account, so you will need to look into this of course, to see whether it is something that you can afford
Management Fees
There will sometimes be fees if you have an account where you manage your shares. It could be that the fees are quite high and you may find that if you only have a small holding, you will end up paying more in fees than you gain in dividends or in the increase in value of the shares. So, this is something else that you will need to watch out for.
Types of Shares to Buy
If you do decide to go ahead you will need to think about what types of shares to buy. You will need to think about whether you want spread across the whole stock market, the top 250 companies, the top 100 or whether you want to pick a particular industry or one or more specific companies. There are pros and cons to each and it can hard to predict which might perform the best. A lot of investors will you a financial advisor to help them to pick.
