Owing or trading stocks is one popular path to wealth creation. The decision to buy and own stocks should be based on your understanding and comfort level with the potential and risks involved. Making money with stocks is not easy, but the results can be rewarding.

Pros and Cons

Stocks are often recommended as part of long-term investing for retirement. Over longer periods of time--20 to 30 years--stocks have outperformed most other asset classes. A defined, long-term plan of stock investment through individual stocks or stock mutual funds can generate considerable wealth for retirement. Short-term stock investing, or speculating, is subject to much higher risk of significant losses. Trying to pick stocks for quick gains requires a large amount of knowledge and research. Even the best stock pickers can be wrong, especially in the short term. The stock market often has periods of time when all stocks are going down, no matter how good or bad the prospects are for individual companies. Large profits can be generated from buying the right stocks. During the first 10 years of the 21st century, stocks like Medifast, Green Mountain Coffee Roasters and Hansen Natural saw their stock prices increase by over 6,000 percent. In the same decade, well-known companies such as General Motors, Lehman Brothers and Enron declared bankruptcy, and their shareholders were wiped out.

Getting Started

The decision to enter the stock market should be based on your financial goals and risk tolerance. Stocks are a good prospect to achieve long-term goals like retirement savings or college funds for a small child. The stock investor must be able to handle periods when stock values are falling. The best stock investors are able to buy when nobody wants stocks and sell when everyone is buying. There are a couple of good ways to get started in the stock market. Find a stock mutual fund with broad market coverage and low expenses. Start investing in the fund with $1,000 to $2,000 and make regular additional investments. Another option is to find a local investment clubs to join. With an investment club you can learn about stock selection from the other members and participate with small, regular investments.

Source:

MintLife: Best Performing Stocks of the 2000s

Motley Fool: The Decade's Biggest Bankruptcies

Motley Fool: Why Should I Invest?

More Information:

Financial Web: Find an Investment Club