Stocks & Shares – Not Always A Good Investment
We are told that investing in the stock market over the long term always proves to be a better investment than to invest your money in a savings account. This is not entirely true and is usually quoted by those who have a motive to encourage you to invest.
It does depend what you mean by long term. Some people would consider a couple of years a long term but the advice is generally that long term is over 5 to 10 years or more.
If we look at the London stock market over the last 10 years we discover that it hasn’t always been such a good investment. It is important to keep in mind that shares will often pay dividends so it isn’t all about capital growth but if we focus purely on capital growth we find that investing in the stock exchange can be very disappointing if you get your timing wrong.
If you had invested in the stock market, either in a fund that follows the Footsie or the All Share market in the period around 1998 to 2001 those shares would now have about the same value. Some shares will have risen well but others will have disappeared without trace. If you had invested 5 years ago you would now be sitting on a great return. You would be making something approaching double your money invested.
All this clearly demonstrates that timing is crucial. If you decide to invest at the wrong time, which is when the market is around its peak then you may find it takes years to recover, if ever. If you invest at the right time you can do very well quite quickly.
The lessons to be learned are that you should be cautious about investing if you think the market is peaking. You should be cautious if you think you will need to withdraw that investment in a hurry as it may be a very bad time for you to sell if the market has dropped.
If you think the market has bottomed that may be a good time to invest and if you can leave the money invested for an indefinite period without worrying to much about it then it may be an excellent time to invest.
The most important lesson of all is that there is no certainty about it. Investing in stocks and shares is a gamble and you should heed the advice that, ‘The Price Of A Stock May Rise Or Fall’. Be aware of it and remember that the only certain things in life are death and taxes.
You can find some good general information about stocks and shares and investing at Basic Investing
Related posts:
- Changes To ISA Account Limits The ISA tax free savings accounts are limited by...
Related posts brought to you by Yet Another Related Posts Plugin.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
[...] from The Money Well tells us Stocks & Shares – Not Always A Good Investment. However, I think the same can be said for any investment because you are never rarely guaranteed [...]