Market Overview

Why You Should Ignore Buying Stocks?

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Here’s the scenario: you receive some extra cash and you don’t know what to do. You check your free credit scores at https://www.annualcreditreport.com and see that you don’t have any outstanding debts. You thought about placing the money in a bank, but realized doing so will do you little good, so you decided you’d rather put it where it can better grow. You asked your friends and researched on the internet and everyone keeps saying the same thing—stock market is in a really good place right now and, since you don’t see yourself needing that extra cash in the near future, buying stocks is best thing for you.

But is it really?

Buying stocks differs from most other types of investments in the sense that instead of lending your money to an institution you actually buy your way in. In other words, it’s a type of investment which, in essence, is a form of ownership and is most ideal for people looking for long-term investment programs; people who don’t mind taking risks and prefer the benefits of having partial ownership in a company and the unlimited potential of a rising stock price.

So what’s the catch? Why should you stop buying stocks? Simply put, because its cons greatly outweighs its pros.

Below are reasons why you should stop buying stocks:

  1. You have absolutely no control over stock prices. It’s not an uncommon knowledge that stocks are highly volatile. A single stocks’ share price can GREATLY VARY from day to day, week to week, month to month or year to year, depending on factors that you don’t have any control over and have absolutely have nothing to do with you like economic inflation, changing interest rates, accounting errors or scandals, introduction of new products or product recalls, mergers or acquisitions, change of management and news releases on earnings and profits and future estimated earnings. Would you really want to be purchasing something whose value can change depending on other people’s—who more often than not, don’t really care about you—actions?
  2. No guarantee. You can’t ask stock market professionals for any form of guarantee about returns of your initial investment. Why? Because given the unpredictable nature of the business, they can’t and won’t give you any. The profitability of your investment is dependents almost entirely upon the rising or decline of stock prices, which is directly affected by your investing company’s actions, and indirectly influenced by your country’s economic performance, among many others.
  3. The market. One of the greatest reasons why you should stop buying stocks is because the stock market is the most unpredictable trading venue in history. In fact, it’s so unpredictable, Bel Air Investment Advisors, one of the world’s leading and most exclusive investment advisor services companies, was able to compile a total of 78 reasons not to buy stocks for each year from 1934 to 2012. Included in the list are the Cuban missile crisis in 1962 and the 1997 Asian financial crisis.
  4. Other people’s bankruptcy is a potential disaster. This goes back to you not having any control over anything at all, including the way companies run their business (unless you become a major stock holder and are elected as a member of the board of directors). Truth of the matter is, companies can and do go out of business, at which time their stock becomes worthless.More expensive than you think. Still think that putting your money in a bank or purchasing bonds is unwise? Most people don’t know this but both buying and selling stocks cost you money in the form of brokerage commissions, which, in the unfortunate face of losses, can actually lead to debts—worst case scenario. We’re pretty sure you don’t want to be waking up one morning, check your free credit score, and see that you owe these people a couple thousand dollars.

Stocks are great investments for people who are willing to take the risk. However, it’s not for everyone and the world has more than enough failed tales to prove that. If you’re a low- to middle-earning individual who is looking for a safer way to make the most out of your extra cash, our advice is to opt for online savings accounts or rewards checking accounts. Yes, doing so won’t give you the big earning potential of the stock market, but, at the very least, both options guarantee safety and the return of your investment. Yes, they also require more initial work like checking of your credit scores, but believe us, all these are worth it.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Markets Trading Ideas

 

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