Is investing in stocks a good idea?

Stocks offer investors the greatest growth potential (capital revaluation) in the long term. Investors willing to stick with stocks for long periods of time, say 15 years, have generally been rewarded with strong and positive returns. Stock market investments have proven to be one of the best ways to increase long-term equity. For several decades, the average return on the stock market is around 10% per annum.

However, remember that it's just an average across the market, some years will rise, others will go down, and individual stocks will vary in their returns. People who invest in stocks can benefit from many different trading strategies. Investors who have more experience and a greater amount of capital at their disposal can take advantage of market waves and make money using short-term trading techniques. But that may not work for those who are just starting out or who are unable to tolerate too much risk.

Holding stocks for the long term can help you overcome market ups and downs, benefit from lower tax rates, and tend to be less costly. The advantage of individual actions is that a wise choice can pay off generously, but the odds of any individual action making you rich are extremely slim. Some brokers also offer paper trading, allowing you to learn how to buy and sell with stock simulators before investing real money. As with any asset, you must hold a stock for a minimum of 12 months to be considered a long-term investment.

If you follow the steps above to buy mutual funds and individual stocks over time, you'll want to review your portfolio several times a year to make sure it stays in line with your investment objectives. For long-term investors, the stock market is a good investment no matter what happens day by day or year after year; it's the long-term average they're looking for. That's precisely the opposite of stock trading, which involves dedication and a great deal of stock research. Even so, financial experts say now is a good time for people to start investing or continue to add money to stocks.

Looking back at stock market returns since the 1920s, people have rarely lost money investing in the S%26P 500 over a 20-year period. The chart above shows how Edward Jones narrows down a list of 65,000 stocks to reach the list of 280 stocks he recommends. Choose the option below that best represents how you want to invest and how practical you would like to be in choosing the stocks you invest in. Usually, that means using funds for most of your portfolio Warren Buffett has said that a low-cost S%26P 500 index fund is the best investment most Americans can make and choose individual stocks only if they believe in the company's long-term growth potential.

While worrying about daily fluctuations won't contribute much to the health of your portfolio or your own, of course, there will be times when you need to check your stocks or other investments. If one type of stock or asset declines in value, but other types of investments rise or stay the same, your entire portfolio remains largely unaffected. A robo-advisor offers the benefits of investing in stocks, but doesn't require its owner to do the fieldwork necessary to choose individual investments.

Megan Dobbins
Megan Dobbins

Incurable internet junkie. Coffee practitioner. Infuriatingly humble travel buff. Amateur music geek. Proud beer expert.

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