Is investing in shares right for me?

There is no question investing in shares can be fun and financially rewarding. I know the possibility of earning considerably higher returns on my savings than the pitiful rates really appeals to me, but I can fully appreciate that it isn’t for everybody.

How old are you?

I always think a persons can affect the reasons for investing in the stock market. Let’s look at two examples as to why I believe this.

My dad is retired and in his 60s. He has worked hard all his life and has some money saved. His main focus in life now is enjoying his retirement. He is happy, he has enough to live comfortably and he doesn’t have the desire to risk his money. I totally understand this view, it makes sense.

I’m in my 20s and I love the stock market. I have enough money to live and enough money to invest in the stock market. I am personally taking a long term view with my stock market investments. If I can earn a modest 12% per year, in 25 years my money will increase by around 17 times.

In 25 years time, my dad may no longer be here, I sure hope he is though! Can you see where i’m coming from?

Can you afford to lose?

There is no doubt investing in stocks involves considerable risk. To find out more about the risks involved, feel free to check out my stock market risk page.

It is important to make sure that you are still financially comfortable if your investment in the stock market down considerably.

If money is tight and you have kids to feed and a big mortgage to pay, investing in shares may not be appropriate for you at this time.

A wise investment strategy is to only invest money that you can comfortably afford to lose. Whilst it is unlikely you would ever lose all the money you invest in stocks, especially if you invest in blue chips, anything is possible. Always be prepared for the worst case scenario.

Can you handle the volatility?

Do you feel you would be able to handle the constant fluctuations in your investment value? Every day the market is open, your investment value will fluctuate. Some investors get overly emotional and are unable to handle the constant ups and downs. Unfortunately this can lead to rash behavior, such as selling shares at the wrong time and losing money.

If you are a cool customer, you will probably be fine. However, if you are likely to be nervous and checking your investments every five minutes, then investing in the stock market may not be for you.

Personally, when I started buying shares, I did watch them all the time. It drove me crazy! It took me many months to emotionally detach myself.

One thing you can do to prepare yourself is to play a stock market simulator to help get you used to the volatility before funding an account with a broker.

Do you have the time?

Buying stocks and shares does take time. Long term investing requires the lowest time commitment from you, but it is still going to take time to look at different companies and find stocks you feel are an attractive buy.

Conclusion

In conclusion, there is no question that the stock market offers the opportunity to earn a higher return than the risk free rate offered by your bank, possibly even many times more. However, it is important to be fully aware of the facts before trading.

If you personally feel you can handle the constant volatility of the stock market, have the time and have some money you can comfortably afford to lose, then investing in shares just be exactly what you are looking for.