Anybody can invest in the stock market, yes. But should any given person? There are traps to watch out for.
If you are in it to get rich quick, you will likely lose. Why? Because you probably won’t build up an emergency fund first. You’ll put a chunk of money in your brokerage account. Invest in companies you know of but know little of the financials. Then wonder why the market value of your brokerage account goes down in a hurry. Panic. Sell. Lose money.
Anybody, rich or poor, can make more money investing in the stock market than virtually anywhere else. But you can’t depend on making money today. That’s why you need an emergency fund. Just in case your life takes a bad turn and you need money. Having that emergency fund means that you don’t have to draw from your brokerage account.
Next, you must know more about a company than it’s name, product it produces, and whether it’s popular or not. You must understand it’s financials and how much the stock is actually worth. A stock can be worth more or less than its market price.
Third, even if you have an emergency fund and you understand the companies you’ve picked inside and out, you could still lose money in the short term. Market value that is. You must be dedicated enough to take it on the chin for a while. Because market value means very little unless you sell.
Selling is where you lose or make money. Market value means nothing until you do. Still, it can be very uncomfortable to lose 20% in market value right off the bat. But yes, this is possible. Remember, you have your emergency fund if you really, really need money. If you picked your stocks well you should give your picks a little time and hopefully they will rebound.
Gains are dependent on several things including principle invested, the companies you pick, and time. Generally, 5 years is what I would give a stock unless you notice something with the fundamentals (financials) that you did not notice before.
You can beat the heck out of the indexes if you pick well. But that doesn’t mean that every day is an up day.
More Reading:
- How Long Does It Take To Make Money In Stocks – Simplified Investing 101
- Expert Stock Strategy: How Long Should You Hold A Stock? – Liberated Stock Trader
- I don’t check my stocks every day — and you shouldn’t either – I Will Teach You To Be Rich
- How Much Money Can You Make Trading Stocks? – Groww
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