Long-Term Rewards of Stock Investing
Stock investing provides investors with good returns over the long term. However, it is connected with a certain degree of risk you should be aware of.
Historical records provide evidence in defence of this statement. For example, it has been proven that a diversified portfolio of stocks has provided it possessors with an average of 10% return. As a result such a portfolio has sustained a winning position for long periods of time.
Usually you will observe frequent ups and downs of the stock market.
A market that is experiencing falling prices is very disturbing to investors. However, historical records have shown that it doesn't last for a long time. Moreover, the market has experienced more ups than downs in general. But, you should not rely on this since at the time you decide to start investing the market may begin to decline, which will lead to loss of your hard-earned money.
Additionally, bear markets are bad for those investors that need to convert their portfolio into cash. In such a case even a small period of time may seem as a lifetime until it passes away.
As a rule, even if you actively observe the market, you should consider the option of stock investing only if you are an active trader.
Therefore, if you are nearing your retirement or you foresee that you will need the money after five years, it is better to avoid keeping all your investments in stocks. This is recommended since stocks are long-term investment tools. Stock investing may provide you with great opportunities for establishing a financially good retirement nest but if you are about to retire, investing in stocks only is not recommended, because over the short term the stock market is very volatile.
Still, even if you are nearing your retirement it is recommendable to keep a part of your investments in stocks in order to provide for some protection against inflation. The biggest part of your portfolio is good to be in more stable investments, such as bonds in order to protect against market volatility.
Finally, as rewarding it may be over the long term, the stock market may have negative effects over the short term. So, we recommend that you don't wait too much and start investing as early as possible in order to be able to benefit from the long term rewards of stock investing.
Opening a OptionsHouse account to benefit from their low $3.95 stock trades (currently they offer 100 free trades) is a smart idea.
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