There has been an exponential rise in the number of people taking up investments as an opportunity to increase their financial worth. With the numerous investment options available, deciding on the type of investments to consider has never been so difficult. If you are relatively new to investing, investing in the stock market is probably a bad idea. Nothing prepares anyone for the quagmire that unfolds after investing in stocks.
Investing in stocks is generally considered to be high-risk. The variations in the stock market are the stuff of nightmares. It’s addictive to check how the stock market is doing every trending day and the emotional torture that comes with that is unhealthy. Even when the stock market is bullish, there’s the anxiety that comes with not knowing how it will perform in a few days. The stock market requires one to be rational to make logical decisions. The emotional rollercoaster that is the result of the ever-changing variations comes with its own additional set of problems. When you are emotional, all logic is thrown out the window and you are not in the best position to make any decisions if there is uncertainty or a steep decline in the market. When there is the anticipation for the market to perform better with time and it continues to spiral downwards, you risk losing all your stock.
In order to make a considerable amount of wealth when investing in stocks, it has to be a long-term investment. Generally, short-term investments have more risk attached to them than long-term investments. The other tempting option to accumulate wealth using stocks is not to diversify the investments with a high return, which is in itself is a risky venture. A shortcoming of long-term investments is that they are most people are either unwilling or unable to take them on. When people think of investments, the first thing they think of is making easy, quick cash. The general expectation is to buy stocks at a low price and sell at a higher price. The flaw in this type of thinking is it doesn’t consider the variations in the stock market over a shorter period. If you’re looking to invest in the short-term, the chances are you will buy at a high price and sell at a low price as you rush not to lose your stock when the market is fragile.
Depending on how you look at it, another hiccup with stocks is that when you buy them, you get a fraction of ownership from a company and that comes with some responsibilities. This isn’t ideal because since you own part of a company, you are also liable to bear risks. This can lead to losing stock if the company experiences a downfall or liquidates altogether. It also doesn’t help that an investment in stock has no maturity date. As a result, when you want out of the stock market, you have to sell which, making you susceptible to liquidity risk where you could be forced to sell for a lower value than you bought the stock for.
These, coupled with the fact that there are other investment options that are low-risk and offer good returns on investment, are the reasons why one should tread carefully when trading in stocks. There are other investment options in the market that are safer and still have attractive interest rates. A money market fund is one such option. It’s a relatively low-risk and appropriate investment for investors who want to earn some income and want their principal amount to be secure. There is easy entry and withdrawal without worrying about the prevailing market situation or the risk of liquidity. Therefore, if you're looking for an investment opportunity that is relatively safer with attractive interest rates and most importantly, peace of mind, then a money market fund could be the investment choice for you.
*The views expressed in the article are the writer's and should not be seen as an endorsement. Before making any investment decisions, do your due diligence and seek expert financial advice.
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