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Isn’t the Stock Market too Risky for a New Investor?

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Before you think about investing your money in the stock market there are three broad issues you need to discuss, analyze and prioritize.

  • Do you have precise short term and long term goals, meaning are you aware of the purpose of investing the money?
  • Do you have a clear time span for utilizing your investments once your goals are finalized?
  • How much risk can you absorb in pursuit of higher returns?

Deciding goals and the time frame for achieving these goals is easier but deciding the extent of risk that can be taken and threat of loss that you can withstand needs deeper introspection.

The reason why risk appears so scary, and what can be done to overcome that fear

If the very notion of taking risk scares you no end it may be because of an incomplete understanding of the stock market and lack of knowledge regarding the instruments that permit you to distinguish between low, moderate and high risk investments.

The market allows you many options for growing your money investments in a healthy and steady manner without risking your principal fund. There are many instruments like CDs, money market funds and stock index funds, where you can commit your money safely without moving directly into individual stocks. There is absolutely no compulsion in investing in stocks individually and paying a steep price in mental stress and its physical symptoms that take a toll on your health and wellbeing.

Stocks are risky but potentially higher performers that outrank all other investments, if carefully handled

We all hear a great deal about the stock market and its volatility and this refers to the rapid fluctuations in share pricing that spell doom for many investors that lose even their principal investments by 20% to 30% or even more. Such risks can be mitigated to a great extent simply by choosing index funds or really diversified and well managed mutual funds. You will discover that even moderately risky investments, if held for a longer time frame can yield unexpectedly higher returns. This brings us to the time factor.  Even stocks that are treated as worst case scenarios have a habit of escalating in value given enough time. The importance of diversifying your portfolio by maintain various stocks covering a wider risk profile, cannot be overemphasized.

For thirty year investments that are the norm for retirement planning the stock market offers the finest growth prospects, miles ahead of CDs and savings accounts or even bonds.

Risk is perfectly fine provided you approach it in a disciplined way

We are fond of saying there is no gain without pain and in the same way there is hardly any future in wealth creation without taking some degree of risk in the stock market. Playing you cards correctly means diversifying your stock options making sure to keep high risk assets within twenty or thirty percent of your portfolio, while concentrating on stabilizing  your assets through investments in bonds, index funds, money market funds and mutual funds.

How can you overcome your fear of losses or cash crises?

Many people wonder, worry and fret over the threat of losses and the potential damage stock trading can inflict, but as we have already discussed there are wonderful ways to invest without losing one’s sleep and without risking more than a fraction of your investment. To combat worst case scenarios you can always resort to cash loans for title.

These pawn car title loans come to your rescue quite effectively by helping you cash up to 60% of your car equity. The auto equity loan levies interest not exceeding 25% APR which is quite realistic considering how desperate payday loans become in squeezing back breaking interest beyond 400% APR. The auto collateral loan delivers the fund instantly merely by securing the collateral of your car pink slip, and convenient repayments are the icing on the cake.

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