Maybe you’ve been relying on your personal savings account to grow your net worth and prepare for long-term financial goals. However, you might quickly realize that you’re barking up the wrong tree. A regular savings account with your bank provides liquid cash in an emergency. For a higher return on your money, you’ve got to look elsewhere.
You may open a money market account or a certificate of deposit to get a better interest rate than your regular savings account. However, the rate of return on these investments do not compare with the stock market.
Understandably, dabbling in the stock market can be a little intimidating, and you may prefer safer investments. You work hard for your money, and the thought of losing a chunk of your savings in the market may leave a bad taste in your mouth. However, if you’re looking to take your investing to the next level – and you have a strong stomach – the stock market might be your meal ticket. But while an average return of 10% is possible with the stock market, don’t let this percentage cloud your judgment.
Some people enter the stock market with big dreams of striking gold – and some do. But statistically speaking, this isn’t the norm. And although I couldn’t find a concrete figure, it’s estimated that approximately 95% of investors lose money in the stock market. Not that some of these investors won’t go on to earn huge profits down the road – but loss is inevitable. And if you don’t know how to play the game, you can waste money trying to beat the market.
Yes, you can educate yourself and learn about profitable stocks, read books on how to beat the market, and even consult with investment pros. There are, however, no guarantees. This can start a vicious cycle – an obsession with big returns, and losing your shirt in the process.
Here’s the thing – you cannot predict stock performance. A stock may be strong today and hit rock bottom next week. Do you have what it takes to stick with a stock through thick and thin? Most investors don’t, thus there’s always the chance that you’ll react emotionally and pull your money when a stock plummets. This can be either a good or a bad move, depending on whether the stock recovers.
It doesn’t matter whether you have a “good” strategy, there are no guarantees. Do some investors see yearly returns between 10% and 15%? Of course. This doesn’t mean that you’ll see a similar return on your investment. And if you speak with a few of these fortunate investors, they might chalk it up to chance.
Understand that there is no foolproof method to beat the stock market. The market can offer high returns and it’s perfect for long-term investment strategies. But if you constantly gamble with your savings, or make it your aim to beat an unpredictable game, you might end up with less than you started with.