When it comes to investing, the first thing many people think of is the stock market. Stocks are a high-risk, high-reward option. As such, they can be really beneficial, but they can also cause people to lose a significant amount of money. Before investing in stocks, keep in mind the following points.
Stocks Are Volatile
More than just about any other investment, stocks can fluctuate rapidly. A stock can go up and down many times within a single day. In a matter of days, the price can dip quite low. Things like scandals, lawsuits, or even low earnings reports can make stocks dip. Likewise, new announcements and great earnings can cause a stock to rise. Additionally, other people can influence stocks, as a hive-mind can cause people to either lose or gain faith in a company.
When investing in stocks, it is important to remember that whole industries can be affected at once. A new law that governs healthcare companies will affect the entire industry, for example. Or, a major player getting taken down can have an impact on other similar companies. Although some people are more comfortable investing in one sector, it is important to understand the repercussions of doing so.
Not All Are Winners
You should also keep in mind that some stocks are not destined to succeed. Some companies go public too quickly and receive major backlash that they can never recover from. Others become obsolete as a result of new technology outpacing them. When deciding whether to put your money into stock investments, you need to be aware that every cent you put in can be lost. Just like gambling, there are no guarantees, and you should only put in what you are willing to lose. Solely relying on stocks will leave little room for error. Plus, timing is a major factor of investing in stocks. If you need money immediately, you may be forced to sell at a loss.
Investing in stocks is not for everyone. It certainly is not easy to manage alone, despite the rise of self-investment apps. Be sure to consult with a certified financial advisor who can help you determine a good path for your investment needs
Representatives do not provide tax and/or legal advice. Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.
Ben Soccodato is a registered representative of and offer securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. www.SIPC.org 6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000