Before you start buying and selling stocks, familiarize yourself with the common risks:
Losses. No investment is risk-free and any stock, no matter its performance history, carries the risk of loss. Stock prices can fall dramatically and even drop down to zero. This can mean significant financial losses for investors.
Time. Online trading can be a time-consuming process — especially when you hand-pick each of the securities in your portfolio. The more active your trading strategy, the more time you’ll need to be ready to invest in monitoring the performance of your stocks and staying abreast of impactful market news.
Stress. The stock market is always moving and can be volatile — a significant source of stress for those with investments that hinge on its performance and direction. If you can’t weather the ups and downs, you might be better off pursuing a more passive investment strategy, like a robo-advisor or managed portfolio.
Market events. Even after thoroughly researching a company, you can’t predict the future. Natural disasters, terrorist attacks, pandemics, bad company news and even changes in government policy can all occur unexpectedly and adversely affect the price of shares.
Lack of expertise. While investing in the stock market sounds easy in theory, it can get quite complicated if you don’t know what you’re doing. First-time investors should exercise caution while building their portfolio.