What's The Risk Of Investing In The Stock Market?

What's the risk of investing in the stock market? While the stock market can be a risky investment, it can also give you good returns. When you buy stock, you are really an owner. With a bond you become...

When you buy stock, you are really an owner. With a bond you become more of creditor, so as a stockholder in a corporation you are going to participate in the very good or very bad. That's where corporations are going to look to raise capital and ensure that they have stock. You and I, we can purchase in the markets. There is plenty of risk. On the extreme level, we have seen companies literally go to zero or close to zero. Enron is a big example of that. If they invest in stocks, people have to spend a lot more of their time watching the stocks and doing their research, because these stocks are going to zig and zag quite a bit more in the short-term. But they come in various sizes. There are small, large, and mid-size companies. Stocks, mutual funds, and investor stocks really need to be a part of an investment plan for longer periods of time. Stocks really should outpace the rate of inflation and give you a greater real rate of return compared to other investments. Since 1996, the S&P 500, or Standard and Poor, which is an index of 500 stocks diversified across many industries, has never had a 20-year period with negative return. But the key is how long you are holding it and how diversified you are.

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