Understanding Investments In The Stock Market

Even in times of economic struggles, there is no reason to shy away from the stock market. Investing is a long term strategy that will see your money go through many different stages. As much as it might hurt to see what stocks are doing now, it will certainly rebound at some point.

The stock market has historically averaged a 10 percent return on your investment every year. This means that your investments will double every decade on average. As long as you are looking to the long term success of your investments, you will see that your money is relatively safe. You tend to only run into issues when you expect your portfolio to make you a million dollars overnight.

When investing it is important to pay attention to financial news. Spending some time going on Yahoo! Finance, or watching CNBC can be a great way to grow your portfolio and get great tips for investments. If nothing else, it can help to just take some time to learn about the market and hear experts speak on what kinds of moves they would make. Listening to the best can improve your own knowledge and make you a more savvy investor.

For those who are really new to the game, be aware of the power of your stock broker. Yes, you can go it alone using online brokers, but having a real person helping you with your trading is important. A professional will have insights into the market that you might not be able to gain access to. This person can hold your hand, or help you be aggressive with ideas you like the most.

One tip for investing is to not look down on a stock just because it might be less than five dollars. Some of the greatest investments ever made are those that involve smaller stocks, or even penny stocks which are stocks that are less than a dollar. These stocks could represent smaller companies, or companies that are going to have Initial Public Offerings (IPO’s) soon and could see their stock soar.

While stocks are the main way that an investor will put money into a company, what about other investment opportunities? Mutual funds are great investments because they are safe and professionally managed. A mutual fund is a collection of stocks from different sectors of the economy. Construction stocks may be mixed in with finance stocks to make sure that when one sector is down, the other can keep the overall value of the fund up.

The financial news today might not be all good, but there is no reason not to get in to the game. Investing will typically be a great way to make money assuming that you have the time to let your money sit. The market will cycle through many boom and bust cycles, so the money you lose today you will make up in the future. It is all about being patient and knowing which companies will provide growth for your portfolio.

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Melanie DeMonte is a retired stock broker who worked at the TSX for 15 years. She’s now a private financial advisor and spends her free time at her cottage.

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