Should I invest in stocks and shares?
Laura Whateley, author of Money: A User’s Guide
Interest in trading stocks has exploded recently. Influencers are urging people to play the market via tags like #stocktok on Tiktok, and the Gamestop story – where Reddit users bought shares for the US video games store en masse, costing Wall Street traders billions – has made it look like it’s a quick way to make cash. So should you?
When you buy stock (or shares or equities, often used interchangeably) you own a tiny part of a company and hope to make money by the value of that company rising. But as we know with, say, airlines going bust, a firm’s value, and therefore how much your stock is worth, can plunge, even to zero. Timing the market – knowing when to buy stock cheap and sell it at a higher price, thereby making a profit – is notoriously difficult, even for professionals.
That’s why putting all your money in one type of stock is very risky. Sensible investing – what you’ll already be doing if you have a work pension – means staying in the market for at least three to five years and buying stock in lots of different companies that are unlikely to all make a loss simultaneously. You can do this by investing in funds. Investment companies, such as Moneybox, Vanguard and Nutmeg, offer a choice.
Trading individual stocks could inject some adrenaline into your lockdown life, but over the short-term it’s a gamble, not a guaranteed way to make money. If it was that easy to win, we’d all be rich.