Considerations before Investing in the Stock Market

Investing pic
Investing
Image: money.usnews.com

Eric Baumbach of Willowbrook, Illinois, studies accountancy and finance at the University of Illinois. In addition to his studies, Mr. Baumbach has gained diverse work and service experience, having worked as a lifeguard at the Five Seasons Sports Club in Burr Ridge, Illinois, and having served as the leader of a local chapter of the Soldiers’ Angels. Beyond his scholarly focus, Eric Baumbach is interested in investment theory and the stock market.

The following three factors are just a few of many important considerations when planning to invest.

1. Think ahead. There is a difference between funds you will withdraw in the next five years and funds you plan to save for later in life. Perform due diligence to find stocks and investment vehicles that match the time frame of your investment.

2. Know your risk tolerance. Some investments are higher risk (more chance of loss), but appreciate at a faster rate, while others are lower risk, generally building interest more slowly.

3. Maintain realistic expectations. Some stocks produce high returns, while others generate are quite small. Although a given stock may generate an unusually high return, understand this could be luck and that most stocks grow over time. A single investment may offer both options, fluctuating over the course of many years. Be conscious of expectations and how they are affecting the decision-making process.