This is probably the most traditional form of pre-internet investment. And is he gone today? No! On the contrary, it is alive, renewed and there are many more opportunities to make money … and lose money … on the stock exchanges.
Is it worth putting money in the bag?
Classic question, to which I will give the classic answer. It depends on how long you want to keep the money there.
If you want, and can, put the money aside for 5 years or more (that is, you are putting some of your SAVINGS in the stock market), then definitely YES. While past performance is no guarantee of future performance, the stock market tends to outperform other forms of investment in the long term.
So what if I want to make a short-term profit?
Once again, I will give a classic answer to this classic question. BEWARE. You can also LOSE money in the stock market. Yes, it is very true.
Many, many people have lost money in the stock market. Some have gone bankrupt, others have committed suicide for it.
But a lot of people make a lot of money in the City and Wall Street doing just that, don’t they?
True. But it cannot and should not aspire to compete with them. First, you don’t have the resources, the database, the training, and the time to research the stocks as much as they do. Second, and more importantly, it does not have the enormous financial backing that banks / funds have to leverage or hedge its positions. And finally, even they lose money. They just don’t advertise it as much for obvious reasons. Click here to read an article on that topic.
Therefore, you should only play the stock market with money that you can afford to lose!
If you want to play the stock market, keep the following tips in mind, which, once again, are not exhaustive:
1. If you want to have the potential for higher profits, consider buying Contracts for Difference (CFDs). These are sophisticated derivative products that are now available to the public. You only deposit a fraction of the money you want to invest in the stock market and borrow the rest. Obviously, you pay interest on the amount you borrow. This means that your investment is targeted. You can get stronger profits, but also more painful losses! I invested $ 3,500 in a CFD from a top company in August 2006. I’m still licking my wounds !!
2. Keep in mind that you no longer have to trade just stocks. You can trade gold bonds, derivatives, and commodities like oil, gold, and silver. If you think you have a better understanding of a particular market, please do so!
3. Research the market. For example, every day I read This is Money. Every weekend I read the Money and Business section of The Guardian. I try to choose first-class stocks that are giving a relatively high dividend yield. This is interesting for two reasons.
(a) If, like me, you are buying shares in a CFD, you will pay interest the longer you keep the position open. However, a dividend will also be paid to you. Therefore, a higher dividend helps offset the cost of holding the position open;
(b) These stocks may soon attract hot money and therefore drive up their price;
Obviously you need to take this with a pinch of salt, so ALWAYS research the company first to try and determine why this is the case. For example, has a benefit warning been issued recently?
My tips for investing in the stock market are:
1. Investing in currencies: the least volatile and most predictable markets;
2. Invest in funds – they are less volatile and still offer good value;
3. Never act on the basis of inside information, you can go to jail for it!