Tag Archives: Stocks

On risk…

 In finance, risk refers to the degree of uncertainty and/or potential financial loss inherent in an investment decision.  In general, as investment risks rise, investors seek higher returns to compensate themselves for taking such risks.

US Securities and Exchange Commission

We take risk each day. The decision to buy or sell in the stock market, real estate market, insurance market, sneaker market, farmer’s market or pretty much any other marketplace, carries some form of investment. The key to success is learning to manage risk.

The stock market is one of the most accessible means to building wealth. Unlike real estate, which often requires a large amount of capital or a business which requires a large amount of time, opening and funding a brokerage account can be done is as little as 30 mins and with only $100. While the thought of losing $100 in an unfamiliar marketplace may seem risky, historically the stock market, the S&P 500 because of its broad scope, has returned an AVERAGE of 7% each year when accounting for inflation. So if one thinks about it, they are actually spending $100 per month for the more probable likelihood of receiving $107 per month. If that same $100 was put into a savings account with the 0% interest rates of today it would have a spending value of $97 because of inflation. Thus, while it is low risk keeping money in a savings account, it proves to be a losing investment

Start stock investing with $100. I suggest this for two reasons. The first being that the federal minimum wage is $7.25 and $100 is about 10% of a monthly salary working forty hours a week. The second because one should aim to invest/save at least ten percent of their income anyway. To help us stick to our goal, we pay ourselves first. What I mean here is that upon receiving our paychecks we should immediately transfer the allotted amount before anything else. This will train you to live on ninety percent of your income or $100 dollars less, and you will start to see the brokerage account as money that you don’t need.

Emotionally detaching yourself from the account will allow you to weather the swings of the market. Also as your experience and account grows, it may allow you to take on bigger risk, which can often lead to bigger rewards. Some of the biggest risk that I’ve personally taken have not been in the stock market but on people. This has netted me some of my largest returns, but it all started with me learning to manage risks through buying and selling stocks first.