What To Think About Before Investing In Stocks

Exploring Risk

Risk tolerance among investors can greatly shape the stocks or other securities they may buy. Usually, lower-risk investments will have smaller return but have a much better chance of not losing money, whereas higher-risk investments can potentially yield large returns while having extremely volatile characteristics. It should be well understood that past performance of any stock is not indicative in any way of future performance. Stocks worth a bundle today could be worthless tomorrow, and there is no way to get your money back. The biggest question investors must ask themselves is how much are they willing to risk to get a potential payback. A good rule of thumb is for newer investors to test the waters in their infancy with safer investments and then gradually branch out to more risky investments that could yield high returns once they have a firm grasp on the investing process.

Continue reading to enter the debate between mutual funds and individual stocks.