Whether you're a first-time investor or a long-time money maker trying to weigh new options, you may wonder if the stock market is the right place to make your next move. Just the idea of investing in the stock market can be daunting for some, but it can be a great way to make money if you know how to do it. Before you dip your toes in the stock market, be sure to weigh the potential risks and benefits.
Pro: You Can Make Great Money
Perhaps the biggest draw to the stock market is the potential to make a lot on your investment in a short amount of time. Many investors have heard tales of people getting in on the ground floor with massive companies like Apple and Google and then making incredible amounts of money. If you play your cards right, you too can create wealth through the stock market. However, it's important to remember that anything with this much possibility for reward will require significant risks as well.
Con: The Market Can Be Volatile
In the stock market, there are winners and losers. Winners can make much money, but those who lose can see all of their investment disappear. If you want to invest in the stock market, you should not be risk averse, and you should be in a stable enough financial position to withstand swings.
Pro: Unmatched Liquidity
Unlike other investments, such as real estate and CDs, investors can easily access money in the stock market. Within seconds, you can sell, buy and trade as you see fit. This means that if you need access to your money, you won't be waiting months or even years to get it. Instead, you can sell your stock quickly and get access to your cash.
Con: Stock Market Crashes
Investors can expect daily volatility in the stock market, but large failures in the system are less common. However, when they do happen, it can take years to recover. Potential investors need only to look back to 2008 to see how badly the market can crash in a matter of hours. While the market has recovered since then, it took years for investors to rebuild their portfolios.
Pro: Flexibility for Your Portfolio
Investing in the stock market can help bolster your entire financial portfolio. You can allocate your funds to your retirement. Best of all, these funds then remain tax free until you use them. There are many different ways to allocate your funds, which can help you become more financially secure.
Mackenzie Maxwell believes that a well-made budget is a key to a happy household. She starting combining this interest with her passion for writing in 2016. Mackenzie has written for financial sites like The Balance and local financing organizations.