Stock Market Information

Given the fact that over the long haul stocks have easily beaten out bonds in terms of rate of return, many investors believe they put all of their investment money into stocks and not worry about the lower returns that bonds offer. However it’s important to ask yourself a number of questions about the money you’re investing:

• What am I saving for? What’s your ultimate goal for this money?
• What’s my timeline? How much time can I leave this money to grow? When will I need it?
• What’s the volatility of this investment? Does this suit my comfort level?

Knowing how much risk you’re taking on and whether you’re comfortable with that risk is important before getting into any investment vehicle. Also the amount of time you’ll be investing this money is equally important. The less time you have to watch your money grow, the more you’ll be vulnerable to short-term fluctuations in the market (see: right now). As an example if you hold your investment for 1 year before selling, you have about a 60% chance of having better performance in stocks than you do in bonds. At 5 years that number jumps to 70%. At 10, 80%m and at 20, 91%. Finally if you hold on to your investment for 30 years or more, you have a 99% likely hood to beat our bonds with a stock investment. That’s historically speaking, anyway.

Knowing what kind of investor you are is a vital step in deciding where you want to put your money. If you’re not comfortable with the idea of losing money in the short term, consider an allocation slanted towards more bond or other safer investment vehicle exposure. Also be sure to note how long you plan on holding onto this investing before selling it or when you’ll need to sell it when you need it.