My Neighbor Said I Shouldn’t Invest in the Stock Market

Does your neighbor like to give you advice? Perhaps the latest you received is that you shouldn’t invest in the stock market because it’s too risky. Unless your neighbor is a financial advisor, you may not want to listen to him or her.

The stock market may seem explosive at times. However, opportunities may arise that you can capitalize on – you may earn a great return on your investment.

And keep in mind that investments, no matter what they are, can be risky, especially when you’re not educated about them.

So, how do you know if you should invest in the stock market? Keep reading to find out.

What is a Stock?

Before you ask yourself, “How do I buy stocks?” It’s important that you have a basic understanding of the stock market.

Buying a stock means you purchase a small piece of a company. Public companies issue shares by selling them to the public who buys and sells them, usually on a market like the NYSE (New York Stock Exchange) and NASDAQ (National Association of Securities Dealers Automated Quotations).

Owning shares of stock means you become a co-owner. In theory, you have a right to a portion of the profits a company makes. The way profits are distributed to investors varies from stock to stock. You may receive dividends, growth in earnings, and change in valuation. But keep in mind that most companies reinvest funds back into the business.

Why Are You Investing in the Stock Market?

Investing in the stock market may make you nervous because it can be confusing. Plus, you may also not understand why you would want to do so.

Keep in mind that most people invest in stocks for regular income or to increase their retirement or earned income. You never know what may lie down the road, for example, you may become ill and require more income than you expected.

Once you figure out “why” you want to invest in the stock market, you’ll need to get a basic understanding of how it works.

Join a local investing group, research, read books , speak with a financial advisor, take classes at your local community center, and consult an attorney about estate planning because you’ll want to make sure your assets are accounted for at the time of your death.

These Are the Advantages and Disadvantages of Trading in the Stock Market

Before you buy stocks, check out these advantages and disadvantages of trading in the stock market.

Advantages

• Earn income from dividends.
• History shows that in the long-term, stocks outperform cash and inflation.
• Better long-term growth potential.
• You choose the risk tolerance of stocks – low risk, high risk, or a combination of both.

Disadvantages

• Investing in the stock market isn’t risk free; the markets have crashed in previous years. Can you handle the risk?
• Income stocks are sensitive to rising interest rates meaning when the rates change, other investments such as bank certificates, corporate bonds, and U.S. Treasury securities will look more attractive.
• Issues with Euro-based countries can affect the markets.

Want to Buy Stocks? Consult with a Financial Advisor and an Estate Planning Attorney

Your neighbor may tell you not to invest in the stock market, but you don’t have to listen to that advice. Don’t allow someone else’s preconceived notions or inexperience to prevent you from making investments. It’s better to explore all of your income options vs. limiting yourself to a certain amount per month or in retirement.

If you’re truly interested in purchasing stocks, find a local financial advisor and make an appointment. Once you get the facts, contact your estate planning attorney and discuss how purchasing stocks would affect your estate and the steps you’d need to take to ensure your beneficiaries receive the monies after your death.

Whether or not you should invest in the stock market is up to you. Together with your financial advisor, you could make great investments that may pay off for years to come.

Finally, the next time your neighbor gives you financial and legal guidance, smile and say “Thank You”. Then walk away, fast!

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