When Aren't Stocks a Good Investment?

Discussion in 'Stock Market Education' started by Rainman, Jul 7, 2015.

  1. Rainman

    Rainman Senior Investor

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    I've heard it said that if you diversify you won't too much no matter what happens. I don't know if this diversification refers to buying the stocks of different companies or going for non-stock related investments.

    Just wondering, what would make stocks a bad investment for anyone? Even if there's a market crash wouldn't the prices go back up after a while? Would buying and holding [at such times] be a good strategy or would it be safer to invest some of your money elsewhere . . . just in case?
     
    Last edited: Jul 7, 2015
  2. ScooterBrandon

    ScooterBrandon Senior Investor

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    Stocks are one of the cornerstones of investing. They offer a wide variety of risk/reward ratio's at various price points.
    Bonds are safer but don't offer nearly the return.
    Real estate is expensive.
    Diversity just means having different investments so you spread risk. There are a million ways to achive that objective. Companies, industries, market caps, public/private sector, fundamentals, technicals, timing, timeframes, geography I could go on and on and on.
    Anyone who has ever said "stocks are not a good investment" does not have a clue. Ignore them and figure out what works for you.
     
  3. Penny

    Penny Well-Known Member

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    For a beginner I would always suggest multi-stock holding funds and bonds, with a ratio based on risk aversion. The classic investment is a stock n a specific company, but single issuer stocks are often risky and volatile. Something like a mutual fund or index fund is a better bet when starting out.

    A lot of people start out getting a stock, get stung and give up. But on the other hand others start with stocks and get hooked on researching the company and following it on the news, and include more sophisticated options later.

    I t is very easy to learn about how to diversify these days. Just use the tools at an online brokerage or an app like FutureAdvisor.
     
  4. JR Ewing

    JR Ewing Super Moderator Staff Member

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    If you're very, very conservative, things like stocks, commodities, and high-yield bonds might not be for you. If you're the type of person who would totally freak out and be unable to function normally if your monthly investment statement showed even a 1-2% loss in a bad month (or a 5-10% loss in a bad year) in the markets, you should stick to deposit accounts, CD's, and perhaps a number of very highly rated bonds (that will generally not pay big interest, especially these days).

    But if you're that conservative, real estate investing and owning your own business won't be for you either. And being that conservative will definitely limit your potential upside. If you're not already wealthy, you won't likely ever get there if you're that conservative.

    People are typically more aggressive and focus on growth / capital appreciation when they are younger, don't need the money for many years, and have more time. When they are older and are going to be needing the money to live on, they usually adopt a more conservative income and capital preservation strategy the closer they get to retirement.

    Generally, the more "safe" an investment / deposit is, the less potential for upside there is.
     
  5. AtlantaSports

    AtlantaSports Senior Investor

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    This post basically sums up the bare basics of the stock market world. Great post.
     
  6. rightct

    rightct Well-Known Member

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    This is the thing that I like most about stocks: You can never pretend anything, probably just barely if you look a little bit in the past. But yeah, what JR Ewing said basically sums it up. I couldn't have explained it any better. :-D
     
  7. pwarbi

    pwarbi Senior Investor

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    People tend to want to make big money, very quickly and if that's a mentality you share, then I don't think stocks is the way to go.

    As a long term investment, and as long as you do the research and know a little about the market your investing in, you will make a profit but nothing is guarenteed.
     

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