Investing: A Wise Choice or Not?

Millions of people are nervous about investing in the stock market after the most recent recession. Many people lost the only financial security they, their homes and many lost their jobs. With so many back on the road to financial recovery, finding financial security is something everyone dreams of. While investing has always been an option for creating financial security, millions are nervous about actually doing it.

To invest in the stock market, people would have to let go of some of the hard earned money they have saved. This is a scary idea for those that have actually lost a lot of money with the recession. The money that has been saved is a financial safety net. It’s a scary thing for them to take their money from a place they know it is and invest in something beyond their control with no guarantee that it will produce a return.

Not So Wise Choice

Just as there are many reasons to invest, there are many reasons people find not to invest. There are many that don’t like the idea of allowing an unseen set of people to control their money or the value of their money. There are others that don’t want to invest because there is no guarantee they will get their money back. The reasons that people have for not investing make sense to them and it’s not fair for others to try and force them to invest.

Investing isn’t something that should be done when a person has serious problems with it. When a person invests in the stock market, there is a level of commitment that is required to see a return on their investment. Those that don’t believe in the stock market shouldn’t directly invest their money there.

A Wise Choice

Just as there are people that don’t believe in the stock market anymore, there are many that do still believe in the stock market. These individuals enjoy the idea of rebuilding their financial standing by investing.

While there are some that believe in investing, there are different levels of comfort they are comfortable with. Some of these people want to be conservative with their money while others are willing to take much bigger risks. No matter what the level of comfort is, people that want to invest should be comfortable with their decision and shouldn’t be told not to do it.

The Reality

Investing in the stock market isn’t something that everyone will do. No matter what a person’s choice is, they should make an informed choice. There are many things about the stock market and investing that non-professionals don’t know. Instead of making a blanket statement about the stock market, everyone should take the time to investigate and learn before making a final decision.

Investing and the stock market are complex topics. They are topics that everyone has an opinion on. Before basing a serious decision about their financial future, people that want to make the best decision for their situation should talk to professional.

Jul. 1 14'
You need to know that it is the best opportunity for giworng your wealth as it allows you to invest in a wide selection of businesses in amounts that represent a reasonable risk to you and benefit from the company with relatively little effort on your part. It would behoove you to read as many investment books as possible to develop your own theories. There are essentially two aspects to investing, finding candidates for investment and proportioning the investments as per the probabilities and risks involved. Most people focus on the former and likewise many books focus on that with the most reliable being the value investing concepts put forth by Ben Graham and espoused by Warren Buffett and others. Essentially finding stocks that are priced below their proven value due to unfortunate but hopefully temporary circumstances.The second is often overlooked but is far more important as getting it wrong could turn good investments into bad investments, in general there are two camps, those who believe that it can be quantified and those that believe that only a relative ratio of reward to risk can be quantified and the rest is dependent on individual judgement. The argument between the two centers on defining the utility of wealth. Those that believe that a reasonable guideline can be derived quantitatively often use the log utility of wealth and the methods are often referred to as Geometric, Logarithmic or Kelly Criterion; it's usually mathematicians, engineers and physicists that are in this camp from as far back as the 1700 s, these include Bernouli, Latane, and more recently Thorpe, Kelly, and Shannon. Those that say that only human judgement will suffice are usually economists such as Samuelson, Markowitz and Scholes. I would say that though it is only human judgement that suffices due to the utility of wealth being subjective, the log utility of wealth is a reasonable approximation and hence the geometric methods provide reasonable guidance from which to develop the human judgement needed.Most people approach this second problem by wide diversification which trades potential for growth for a reduction in non-systemic risk. As to how much diversification is sufficient, that's the trick.Read a few books, ones I would recommend are The Intelligent Investor by Ben Graham, The Dhandro Investor by Mohnish Pabrai, and Fortune's Formula by William Poundstone. In truth you need to read as many as you can bear and formulate your own opinion.There is one far more important aspect, that is to realize that it takes discipline, it will do you no good to spend a month learning about financing and then not using what you learn for ten years. You need to have the discipline to make it part of your daily life, you must divide your income into categories as soon as you receive your income. Traditional categories are Spend , Save , Donate and Invest . The Spend category is so that you never make a financial decision because you want the money to buy something. The Save category is that you never make a financial decision because you needed money due to some unforeseen emergency. The Donate category is so that you never make an investment decision because you felt you had to help someone or contribute to society.
Jul. 7 15'


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