What risks you face investing on the stock market

Fsp Invest, 19 Aug. 2013

Tags: stock market, investing, risks, risk, shares, buy shares, cash, what are the risks of investing on the stock market

If you want to invest on the stock market, it’s crucial you know the risks involved before you get started. And you need to know how much risk you’re prepared to take on. Read on to find out more about the risks when you invest…

As eager as you might be to start investing on the stock market, before you do, you need to know the risks, explains the Red Hot Penny Shares’ research team…

Investing in shares gives you the chance of inflation beating returns in the long term. But companies and markets have collapsed.

As much as prices can rise, they can fall too.

What are you investing for?

So, before you start to invest, decide what you are investing for, for example…
  • For retirement
  • For education
  • For a holiday
  • For a monthly income

You need to decide how much risk you are happy to take on

You also need to work out how risk averse you.

And are you looking for long-term capital growth or do you want to “play” with shorter-term trading?

You need to look at your personal risk profile.

How much can you safely afford to lose in the event of a stock market crash or correction?

How long will you be prepared to wait for the market to stabilise, and will you have the courage and foresight to continue investing when prices are at their lowest ebb?

Your honest answers will determine the extent of your capacity to balance risk with reward.

What cash are you going to buy shares with?

Either way, the golden rule is to only invest as much as you can comfortably afford after meeting your personal and household expenses.

And whatever you do, don’t trade on borrowed money and don’t risk more than you can afford to lose.

There you have it, the risks involved with investing on the stock market.

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