To invest in the stock market must you have to be rich? Not at all. The stock market is, after all, just another form of investing. Having said that, unlike putting your money in to a bank or building society account, returns are by no means guaranteed. In fact, in extreme cases a company`s shares can be worthless if it goes bankrupt, and investors can lose all of their money. That`s why it is worth repeating never to invest what you can not afford to lose.
When you invest in a building society account you will periodically receive interest on your savings. When you buy shares, however, you may receive dividends. The value of those dividends often fluctuates in line with how well the company is doing, and sometimes a company might decide on occasions not to pay a dividend to shareholders. Hopefully though you can expect to see the value of your shares increase over time. This is particularly the case where investors take the medium to long term strategy and hold on to their shares to ride out the rough times when markets are faring badly.One method of accessing the stock market for the smaller investor is through Unit Trusts, or an Open Ended Investment Company (OEIC). Both these forms of investing are designed to pool funds of investors' money, which are then used to buy a range of shares, gilts, or bonds. A fund management company might be involved in purchasing shares in say property, or commodities, shares in Japanese com panies, US smaller companies and so. The list of available trusts is huge, and varied.
This method of getting into the stock market is ideal for smaller investors, especially as many trusts allow units to be purchased monthly by direct debit. The minimum amount can sometimes be as low as 10 a month. That money is then used to buy units in the plan of your choice. Doing it this way means you are benefiting from something called `pound cost averaging` which means that when the shares (or units) are low in value you get more for your money. On the other hand of course when the shares (or units) are higher in value you get less of them for your money. Overall though pound cost averaging helps to smooth out the peaks and troughs. In addition, investors have to remember that fund managers don`t work out of the goodness of their hearts. There are charges involved, sometimes up front, sometimes they come out of the value of the shares or units at certain intervals.Essentially it simply means you are drip-feeding your money into one or more of the available trust pla ns. During a time when markets are volatile that can be a very good time to benefit from drip-feeding. Although it can never take the risk out of buying shares, it can at least reduce the risk.
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