Should I be even thinking about the stock market?

05 July 2017

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Question by Lysa

Should I be even thinking about the stock market?


Answered by Holly Mackay


Well, there’s a simple and a bloody complicated question! It really depends. Have a go at the following questions:

- Do you have savings that you can draw on in an emergency (at least 3 months of income)?

- Are you already on the housing ladder OR not saving for a house?

- Do you have a stable job where you can afford to put money into a regular investment or savings plan each month?

- Do you have a certain amount of money left over at the end of the month that you can set aside for the long-term?

If all your answers are ‘yes’ than you should seriously consider investing in the stock market. It sounds scary but your money is probably going to grow more impressively in the long-term if it is invested in a well-balanced, diversified portfolio compared to a bog standard savings account, where interest rates have been rubbish for some time now.

Longer term investments have time to ride out the peaks and troughs of the stock-market so if you stick in there for at least five years, you have a reasonably good chance of cultivating decent returns.

One thing to bear in mind; there are no guarantees when investing in the stock market. You’re never absolutely 100 per cent certain that you will get back what you put in. You’re taking a risk by investing in the prospects of companies, markets and entire regions; here at Boring Money, we would argue that you have to be in to it win it over the long-term but it’s your call entirely.

If the answers to the questions above are ‘no’, then you should probably concentrate on either building up emergency savings in a decent savings or current account or finessing your credit rating. Don’t opt out of any workplace pension if you can afford not to.

Additionally, if your savings at the end of every month are to fund a goal over the next 2-3 years then the stock market is not such a great idea. If things fall off a cliff, you do NOT want to be a forced seller in down turns. That’s how you lose money.

As an aside, many new investors have had a play with crypto or individual shares over the last 12 months. I would say to anyone relatively new to investing to think about using funds (collections of shares which spread the risk around) and multi-asset funds which are ready-made collections of investments from all around the world. A common mistake is to put all your eggs into one basket and that can go horribly wrong!

Answered by

Holly Mackay

Founder and CEO of Boring Money

I’ve worked in investment markets for over 20 years. I started out at Merrill Lynch Investment Management and worked at a few big names before setting up my first business in 2008.