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Intro to stocks

Is the Stock Market for You?

Introduction

To begin with, I'm sure you've heard of the constant gyrations and the daily ups and downs that provide good headlines for an ever-increasing number of dedicated business shows around the world. These "flash headlines" can leave John and Jane Doe, the average investor, with a queasy feeling to say the least. However, when you are considering investing, a long-term approach has proven to be the most effective. Several empirical studies have shown that over the long-term (10 years or greater), equities or common stock vastly outperformed all other investment tools including bonds, term deposits and preferred shares. As a result, for the overwhelming majority of the investing public, long term exposure to common stocks through individual companies, mutual funds, or index based investments is usually a good idea.

Having said this, your decision must take into account your individual risk profile and ultimately allow you to sleep soundly at night. If, even after you are told that investing is a long term practice, you find that you cannot take the daily market swings with a grain of salt, then maybe common stocks are not for you.

We caution investors not to set their expectations too high. Do not expect average returns to equal the 25% gains we have witnessed in recent years. Historically speaking, you should look for average returns on your stock portfolio to be in the 10-12% range. And yes, there will be some down years (negative returns) along the road. Indeed, returns may fluctuate from year to year but on average, if you can exceed this level, your portfolio will be performing quite admirably.

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