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Friday, June 18, 2010

Is Now The Right Time To Put Money Into The Stock Market?

Investing in the stock market has always been regarded as one of the best ways to build wealth over the long term.  Over periods of over 20 years, no asset class has outperformed stocks in the history of US stock markets.  Between 1926 and 2010, stocks (as represented by the S&P 500 index returned an average of 9.8% per year.  The next best asset class over that timeperiod was long-term bonds, which produced an average annual return of just 5.4%.

However, as you are well aware, investing in the stock market requires discipline and a long-term approach.  Getting in and out of the stock market is one of the sure-fire ways to lose money in the stock market.  Most investment advisers swear by a technique called dollar-cost-averaging, in which you invest a fixed amount of money in the stock market at regular intervals.  The investing continues whether the market is rising or falling, whether it has crashed or recovered.  Because the amount of money invested is the same every period, during periods in which the stock market is weak, you end up picking up more shares, and during periods when the stock market is strong, you end up picking up fewer shares.  Emotional investors who try to time the markets more often than not end up doing the exact opposite, picking up more shares when the market is strong and picking up fewer shares when the market is weak.

With the economic recovery just picking up steam, now may be a better time than any to start investing in the stock market.  It is true that the market has recovered from its lows of this recession, but it still well below the peaks it reached before the economy unraveled.  If the aim of stock market investing is to buy low and sell high, now is the time to implement the first part of that strategy.  The market will almost certainly head higher as the economic recovery takes hold, so you will have plenty of time at that point to implement the second part of that strategy!  Remember, just like in the proverb, the darkest hour for the stock market is just before dawn too.  If you have been thinking about investing, now may be the time to take the plunge.

But investing in the stock market is daunting for beginners with small amounts of capital because of the commissions involved.  Commissions eat into your investments and profits, and can make winning trades losers, and losing trades even bigger losers!  A good, low-cost brokerage firm like Firstrade can help you overcome this problem with low commission rates and absolutely no minimum investment requirement.

Firstrade is an online broker that allows you to open several different types of accounts, depending on your needs.  You can open general investment accounts, IRA accounts, business accounts and education planning accounts among others.  Online trading with a Firstrade account costs only $6.95 per stock trade making it very affordable for small investors to get into the stock market.  Their low commission rates apply to all investors, not just to those who qualify for them by being active investors with lots of commission-generating transactions.  Moreover, they don't charge any inactivity fees, so even if you make no transactions in your account, you won't be charged any money to maintain your account.

Firstrade offers a wide variety of investment choices to choose from.  Whether you are into mutual funds, bonds, options or just plain stock trading, You can even place complex option trades to implement strategies like straddles and spreads without having to trade the options involved individually.  Firstrade not only makes all these investment choices available to you, but also the research to enable you to make good choices.  Firstrade also provides free dividend reinvestment so, if you invest in dividend-yielding stocks, you can have the dividends invested in additional shares of the stock instead of being made available to you as cash.  This gives your money even more growth opportunities.

Once you open an account with Firstrade, you can do trade online using a computer, talk to a broker to execute trades or do mobile trading with a web-enabled mobile device such as a smart phone.  What matters more is not how you make and monitor your investments, but that you are actually investing at all.  Investing in the stock market can be very rewarding, and the sooner you get into it, the greater the rewards.  Remember that at a 10% annual growth rate, compounded year after year, your money doubles every 7 to 8 years.  The sooner you get the clock ticking, the sooner you will see your money grow.  The key to wealth is not explosive growth in a short period of time, but steady growth over the long term.  Good luck, and happy investing!

1 comment:

Payday loans said...

Wow,nice, one of the best read posts so far.

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