Is it good to invest in stocks?
Many people ask is it good to invest in stocks? The answer like many is it depends. What are your goals? A lot of people say stocks are risky. So are bonds. So is a savings account. I all comes down to how you define risk. In a savings account you are at risk to losing your money slowly over time to inflation. Bonds earn more than a savings account, but still the returns are on the low side. For the long term, you need to invest in stocks to make moeny. There is a saying that you invest in stocks to make money, you invest in bonds to keep it. What that means is that you invest in stocks to increase the value of your portfolio, and you invest in bonds to maintain the value of your portfolio.
If you are investing for the short term, such as money to buy a house, then stocks are not the way to go. The stock market goes up and down too much in the short term. You risk the market being down when it comes time that you need the money. But in the long term, stocks are the way to go. In the long term, the stock market has always gone up.
But investing in stocks can be risky also. You risk picking the wrong ones. With bonds and CDs the rates are return are more predictable. With stocks they aren’t. With stocks you are buying part of a company. If the company does well then the stock is likely to go up. If the company doesn’t do well, then you will likely lose money. How do you pick the right ones? Well, unless you are Warren Buffett or Peter Lynch, then you might be better off buying a fund. Mutual funds are actually collections of stocks. So instead of buying stocks in a few companys, you are buying small amounts of stocks in a whole bunch of companies. I personally have bought both stocks, and funds. My funds have done much better than my stocks. You see I am not Warren Buffett or Peter Lynch.
So if you ask is it good to invest in stocks, then my answer is a qualified yes. I recommend investing in stocks via stock index funds such as an S&P 500 index fund.