Why You Should Invest in Stocks

Five Reasons to Invest in Stocks

(By Ken Little)

There are at least five good reasons you should continue to invest in stocks. This is the first of a five-part series.

In the middle of the worst financial crisis since the Great Depression may seem like an oddly inappropriate time to suggest stocks are a good investment.

However, I contend the benefits of investing in stocks have not changed.

What has changed (or needs to change) is the investing public’s perception of the stock market and its associated risks.

There are five good reasons you should continue to invest in stocks:

1. The stock market doesn’t care

The stock market doesn’t care about you or your plans. It doesn’t have any agenda and could care less about yours.

Why is this a good thing?

Despite what you may have heard on late-night infomercials or read in an unsolicited e-mail, there are no magic formulas for investing success.

There are no secrets of the rich and famous; no secret passwords or handshakes.

In truth, there is nothing standing between you and successful investing, but some hard work and understanding the fundamentals of investing.

While institutional investors have an advantage (more resources, more fulltime professionals), you still have access to all the information you need to be successful.

It may feel at times like the stock market is targeting you for disaster; it is not. If you are caught on the bad side of the risk equation (the higher the risk, the greater potential reward and the higher chance for failure), that’s just the reality of investing.

The stock market is most dangerous when investors forget the risk-reward rule and expose their holdings to too much risk, especially when there is not a full understanding of potential losses.

Investing in the stock market should be done with your eyes wide open. When you are blinded by a huge potential payoff or terrified of a loss, you will not make good decisions.

But don’t blame the stock market.