Should You Invest in Stocks? Reasons to Consider Long-Term Investments

Should You Invest in Stocks?  Reasons to Consider Long-Term Investments

All we have to do is look at recent history to see some of the risks that accompany investments in stocks.  It was just five years ago that the global financial crisis created a difficult scenario for those heavily invested in corporate stocks, with important stock benchmarks in all region of the world seeing significant declines in relatively short periods of time.  And while this can seem disheartening for those looking to put their savings to work, the reality is that most of the losses investors suffered between 2008 and 2010 have been recovered in the years since.  So for those investors that exercised patience, one of the most drastic stock declines in decades has little or no real effect on the real next worth of their holdings.

Gaining Historical Perspective

“When looking to invest your savings,” said Kris Alban of InvestingIQ, “the first question you should ask yourself centers on which asset class is going to produce the most solid gains in the most sustainable fashion.”  To be sure, there are many options available when looking for ways to invest your money.   Bonds, commodities, real estate, and forex are some of the most common investment alternatives to stock markets.  But what should be understood is that stock markets have outperformed all of these investment alternatives when looking at the broader financial environment over the last half century.  So while it does make sense to avoid relying on stocks completely, having a firm investment base in equity markets is an important step in achieving the best available investment returns on a yearly basis.

Is it Safer to Avoid investing Altogether?

Given all of the potential risks involved when exposing your savings to the whims and changes of the investment markets, some might even argue that it is a better idea to simply avoid the trading markets altogether and keep your savings as safe as possible.  But what this logic misses is the fact that building inflationary pressures can actually wind up costing you money if your money is not positioned to accrue active gains.  For example, a t-shirt that costs $20 will likely cost more next year, and if your savings are not positioned to capitalize on market changes your purchasing power will actually drop as a result.

Of course, there are risks involved in any investment decision.  But these risks will not always result in losses.  To the contrary, most years in the stock market are actually positive so in the majority of cases your investments will actually produce income for you during most years.  Those deciding to avoid investments altogether, however, will be guaranteed to see some losses as the building inflationary pressures in the market can only bring declines in the purchasing power that is commanded by your savings.    The moral of the story here is that risks are present in any environment, just as your could be hit by a bus when crossing the street.  But this does not keep you from travelling outside your house and it should not keep you from investing in the stock market either.

Tagged stock markets