The truth is that there is risk in just about any avenue in life that a person may wish to venture into, like real estate for instance, there is the risk of your tenants moving out during the night without paying the rent or damaging your apartment leaving you with a large repair bill.
The risk of investment on the stock market is largely attributed to an individual's emotional reaction to the market.
When trading, it is imperative that the trader is able to react calmly to sudden changes in stocks and to use trading tools to buy or sell at the correct time, thus limiting losses and maximizing profits.
Here are some of the advantages of trading on the stock market: 1.
It is possible to invest on the stock market with a limited amount of capital.
As a shareholder you own part of the company in which you hold shares, but are not held accountable for losses incurred by the company.
You have no responsibility in the management or running of the company.
You are able to open or close a trade with a phone call or internet connection.
Stocks can be bought and sold almost instantaneously because there are always buyers or sellers.
The value of stocks bought in good companies will grow over time.
You receive regular dividends from well chosen stocks.
When you access your portfolio online, any business newspaper or financial websites that have the latest market information, you will be able to check the value of your investments and the latest movements in your stocks.
Stocks will provide a better return than most other investments, provided that they are traded properly.
The disadvantages of trading on the stock market are: 1.
Trading on the stock market is not a get rich scheme and requires dedication, persistence and the ability to control your emotions, because fear and greed are your worst enemies.
Although you can always sell a stock, you may not always get what you are hoping for, especially in a bear market.
It is always possible that the company that you have bought stocks in may run into financial trouble and possibly bankruptcy with your stocks following closely behind.
Trading on the stock market requires discipline, persistence and a good strategy that has been thoroughly investigated.
It is imperative that you always have an exit strategy when you enter any trade and that you follow it closely, keeping your emotions under control.
Whenever you are in doubt, always contact your financial advisor or stock broker to ensure that you are not running blindly into any trades.
Understanding the stock market and how different external factors affect the sector that you are trading in will make a huge difference in your choice of stock.
Work at a comfortable pace and gain as much knowledge as possible along the way to ensure that you become a confident trader over time and build the wealth that you require.