How to Invest in the Stock Market Safely and Smartly

In the long-term, the stock market has done better than virtually any other form of investment. Index trackers could be your best option as they are cheaper and less risky than buying individual shares.

Why invest in stocks?

stock market

The Government is urging us all to invest more, to safeguard our retirement. But with the global financial crisis still strong in the memory it can be tempting to dodge the financial system altogether and park your funds under the mattress for safekeeping. But doing this won’t earn you any interest and your cash will actually go down in value as inflation erodes its worth. You stand a better chance of building a retirement nest egg by investing the smart and safe way: in stocks and shares.

Following the financial crisis stocks and shares plummeted, however, they have since recovered and the FTSE 100 index recently struck a 14-year high. And, says Alan Warner, director of leading independent financial advisers Duncan Lawrie, “Savvy investors feel that shares will gradually climb further.” Of course, shares ought to be just one of your investment strategies. “You should have a balance—shares, property, fixed-interest investments, such as corporate or government bonds, and cash,” advises Anna Bowes, director at Savings Champions. “But if you’re looking for long-term capital growth, you definitely need to have some money in shares.”

Just look at the evidence. In the long-term, the stock market has done better than virtually any other form of investment. According to Barclays Capital, the investment banking division of Barclays Bank, which has data going back to 1899, shares produced the best overall return between 1900 and 2000—better than cash, better than government stock, better than bonds. Not every year. Not even every decade. But if you had left your money in for 25 years there is no period when shares were not worth more at the end than at the beginning.

You don’t have to be rich to take advantage of today’s opportunities on the stock market, but you will need spare cash, which means saving hard.

Click next to find out the City’s best kept secret…

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