Are Stocks Too Volatile?

Stocks are one of the most common and popular investment tools available to most people. Advances in market technology have made it easier to purchase stocks, and it has also made it possible to buy and sell fractional shares. However, just because stocks are an accessible investment option doesn’t mean that you can buy and sell them without accepting some level of risk.

Stocks Are a Popular Investment

Stocks have been bought and sold for most of American history. Today, you can buy stocks individually or as part of a larger fund that aims to track a certain sector of the economy. Mutual and index funds are popular because they offer investors the ability to diversify their portfolio with a single purchase. Generally speaking, stocks and stock funds will appreciate about 7% on average before dividends are taken into account.

Just How Volatile Are They?

With trade wars being a regular fixture in the current economy, it can make the timing for buying stocks fairly tricky, says Manley Capital Management. If you time a stock purchase wrong, it could lead to a period of financial struggles. There are many reasons why a stock price could go up or down over a period of several minutes, hours or days. In some cases, a bad earnings report or a CEO stepping down without warning can cause investors to get skittish and sell their shares.

There Are Ways to Overcome Issues Related to Volatility

In some cases, there is no good reason why a stock’s price goes up or down. However, you can minimize your potential losses by carefully researching a stock before you make a purchase. If you can keep your emotions in check, it may be easier than you think to make good decisions even when the price is fluctuating quickly. It may also be a good idea to consider selling stocks and shifting to bonds until the market calms down. In most cases, the bond market is less volatile, which means that it’s easier to predict your return over a given period of time. Buying stocks can be an effective way to grow your wealth at a rate that is higher than inflation.

For younger people, the fact that stocks are volatile can actually present a greater opportunity to become financially secure. If you have any questions about buying, selling or managing a stock, financial advisers and other professionals may be available to help.

Here’s another article you might enjoy: What Are the Benefits of Entering the Stock Market?