The Suitability Of Stock Investment For You

The suitability of stock investment for the individual is of paramount importance.

When choosing an investment, there are always many alternatives and as such it should be possible to pick the perfect thing. Despite the informational bias on this site, stocks and equities are not usually suitable for everyone or on every occassion. Therefore, the suitability of stock investments for you, the individual, is and always should be an issue to consider.

In most five to seven year periods, the returns of stocks and shares has comfortably beaten inflation in the major markets and economies. But, as is always repeated, past performance is not necessarily a guide to the future. The general increase in business and productivity results has worked its way into long term rising capital prices and dividend incomes. This in turn leads into increased performance of indirect equity products such as mutual funds, unit trusts, life assurance investment products, SICAVs and more.

There have been incredible short term fluctuations in capital values. However, the income stream from dividends has proved to be relatively stable.

Stock market based investments offer an opportunity to make a real and positive return on an investment. Yet, they should only be considered by people with a time frame of at least five years.

The suitability of stock investment is very low for people with a short time scale and those who cannot afford to see their investment lose value - even if only on a temporary basis.

General financial planning principles recommend that any individual uses spare money for other things before making direct equity investments. For example, it is important that an emergency fund be made and held in a cash account should there be a short term requirement for money.

Other longer term financial products should also be considered. These should include CDs, timed deposits, bonds and debt instruments.

For many people, a much more sensible option than any invesment will be the repayment of short term debt. These might be credit or store cards or overdrafts - essentially, anything with a high compound interest rate should be repaid before investing directly into stocks.

We hope that readers will take heed of these warnings and assess their financial planning from a logical and conservative perspective.

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