How To Use The Stock Market For Retirement
By Justin DeMerchant
Planning for one's retirement is to think long term and to start early on. Preparing for it is a lifetime process of reducing all possible risks and obstacles that get in the way of that bright future. Many people have turned their eyes to and put their hopes on the stock market, which, ironically, thrives on uncertainty and speculations. But these uncertainties in the game of stock trading can be most profitable, when they are understood and capitalized to the investor's benefit.
If one is looking forward to a retirement life characterized by financial freedom coupled with incessant income, it is only logical to invest in long-standing companies that show consistent growth rate and dividend accumulation for at least 10 years. However, the downside is that these large and stable companies sell their shares at a high price. While such investment is sound, it may be unreachable to those with only a few hundred dollars to start investing. But there is a type of stock investment for someone like John Doe with only two dollars in his pocket - penny stocks.
There have been a lot of negative perceptions about trading in penny stocks. Companies that sell them do not necessarily belong to the Fortune 500; they are usually upstarts that are yet to be proven, idealistic, and small to medium in scale. Investing in them is highly risky and volatile. But then, so is any other type of stock, or even investments in general. All stocks are presumably speculative anyway. With penny stocks, since the investment is small, so is the loss, if it is a bear market. It is a painful loss, indeed, but one that is manageable.
That is just one side of the coin. As much as they are high-risk, penny stocks are high yielding. To make them work for the investor, the trick is to be early in the game, and to be constantly on the look out for small businesses with a lot of potential to increase in market value. No doubt, it takes discipline and hard work. It is like mining for a rare jewel. Because of this, trading penny stocks discourages people at the onset. But once the the right company is found, the rewards are worth all the effort. With small investments turned into small fortunes, and they accumulated over time as the investor becomes better with the trade, early retirement becomes plausible.
But there should not be a dichotomy between investing in large companies and putting one's stakes in emerging ones. If one's cash flow allows for both, the chances for returns are better. In fact, retirement investment plan should be further broken down and diversified into other forms of investment other than the stock market. Trading strategy should be as diversified and flexible as the investment portfolio.
And here is another trick up the sleeve keep investing, even during the retirement years, if only to guard your investment from the increasing inflation rate. It should be remembered that money is either gained or lost; it is either earned or spent; and to keep it idle is to lose it just the same. A smart investor who is keen on securing a rewarding life of retirement will always make his money work for him.
About the author
Justin DeMerchant is the founder of trading blox, stock trading program, and da big market man where information on stocks and investing can be found. from http://www.FreeArticlesAndContent.com
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