Stock Market Information

So, let’s say that you’re in a pretty good financial spot right now. You have 3-6 months living expenses saved up and stashed away in a low risk investment vehicle such as a high yield savings account or money market fund, and you’re looking for the next step. First time investors are initially worried about the time of their first stock purchase. After all, start at the wrong point (look at recent market losses) and you could be looking at big losses initially.

Thankfully as a new investor, time is on your side. Over the long haul (decades, typically) the compounding returns provided by a well-chosen investment begins to add up, and you’ll be looking at gains no matter where you start out.

if you’re risk averse, there are a number of dependable return options for shorter time frames. The short-term U.S. Treasury bills, for example, have given about 3.7% from 1926-2003 annually. Long-term government bonds have averaged 5.4% from 1926-2003, but returns have been more volatile.

Stocks, for their part, have been good to investors historically speaking. Overall, large-cap stocks are looking at a 10.4% annual return from 1926-2003. There’s also more volatility here, ranging from declines in the 1930s to large gains in the 50s, 80s, and 90s.

This leads is to the real question: when do you need your money. If you’re looking to use the money in the next 5 years, you’ll avoid stocks and mutual funds for the most part. Instead, consider bond mutual funds or real estate investment trusts.

If your investment horizon is 10 years or more, stocks are the most attractive option.

If you decide to invest in individual stocks, be sure to keep a close eye on your portfolio. Any investment portfolio requires regular care and attention. You need to check on your investments and make sure you’re beating the market, otherwise you’re better off going with a plain old index fund like the S&P 500.