In recent years, with the introduction of internet banking, investments in the stock market became available to a broad general audience in a simple and accessible way that is almost as easy as making a bank deposit. However, despite the population’s rediscovered interest in stock investments, some people prefer to refuse the possibility to increase their funds through stock market investments due to two major reasons.
First, investing in stock includes a number of risks and requires a set of skills and knowledge. The principle of learning from mistakes is not applicable in stock investing, as any mistake could potentially lead to significant financial losses. To avoid making mistakes, one should thoroughly educate himself on the topic and develop an extended strategy, as significant gains do not usually happen overnight. Moreover, the future investor must understand that in order to succeed in stock investment, one must systematically monitor the market and companies and hold the emotional capacity to withstand the emotional rollercoaster of stock changes. For example, when Six Flags announced that they had difficulties in China and noted that there might be a reduction in payoffs, the stock lost five years’ worth of gains in price immediately after the news (Gaille, 2020). Although the stock market presents people with multiple opportunities to increase their capital, there is an almost equal possibility for investors to lose their investments. Achieving impressive results in stock investments requires not only the investment of funds and the investment of time and attention.
In general, stock investments require more time and attention from the investor, and the topic also includes many points and nuances that are not obvious to beginner investors. There are several details to the processes in the stock market investments that do not fit the shared perception of the stock market. For example, although it may seem that dividends on common stocks play a significant role as part of the income from the stock investments, there is no obligation for a company to pay dividends on common stocks. Next, although the stock market is perceived as gambling due to possible risks, in fact, people are forced to invest in the stock market because of low-interest rates and inflation. For example, because of the inflation level in the UK, £1,000 from 1989 would now equal around £460 (Brett, 2019). Putting the same amount of money into a saving account at the start of 1989 would make the growth almost equal to the level of inflation (Brett, 2019). Moreover, beginner investors or those unfamiliar with stock market investments might not understand that it is inefficient to make investments in only one company like Apple or Tesla. Investors must consider all possible risks and eventually construct a diversified portfolio with stocks from several companies in different fields to minimize their risks. This means that there are many pitfalls in stock market investment, and the overall process could be very different from people’s expectations.
In conclusion, people prefer to stay away from stock market investments for several reasons, which could be separated into two primary concerns. The first reason is that stock market investments require investments of time, attention, knowledge, and skills. The second reason is that stock market investments are different from people’s expectations, and there are many pitfalls in the process that beginner investors may overlook. An individual should take risks in stock market investments only if he aims for a long and patient approach, has the necessary skills and knowledge, and makes his own research on the companies.
References
Brett, D. (2019). 29 reasons not to invest in the stock market. Schroders. Web.
Gaille, L. (2020).17 key advantages and disadvantages of common stocks.Vittana. Web.