Is It Worth Learning About The Stock Market?

As the 2008 banking crisis has grown from sub-prime mortgages in the United States into a global banking meltdown and then on into a sovereign debt panic, the world's stock markets have been understandably volatile. In fact, it is virtually impossible to gauge just where they might go next and why. To suggest that they have defied gravity through the crisis is an understatement.

In such circumstances, is it really possible to benefit from learning about the stock market? Can any private investor judge the next swing with any accuracy?

It must be clear to almost everyone that reads any book about long-term investing strategy that many of the concepts seem to be a little fanciful since the summer of 2007. With wild market swings, currencies, banks and economies on the verge of collapse, it is very difficult to know what to do and when.

Under such circumstances, there seem to be two solutions that offer the potential for some stock market exposure.

Firstly, it is possible to simply invest in a long only fund – such as a mutual fund or unit trust – and leave it all to the professionals to worry about. This is, after all, how most pension money is managed. This is passive investment and the only task of an investor is to select an appropriate fund in which to place money.

For those that dislike even this, there are funds known as 'index tracker funds' that place money directly into the main index of the market in proportion to the companies listed. The investor can receive stock market exposure, and simply do as well or as badly as the index does, but pay a lower amount of annual management fees.

This approach has potential benefits since there have been numerous studies that show that the majority of funds managed by professional asset allocators perform less well that the major indices over time. In other words, the private investor is likely to outperform many other funds and pay less each year to do so. Not a bad combination.

The second approach would be to really take to heart the desire to learn stock market investment and trading strategies and to take assertive control of personal money management. In such wild stock market conditions as have been seen since the summer of 2007, this would most likely take the form of shorter-term positions. In other words, trading rather than investing.

Trading any kind of financial asset, especially in a volatile market can be a very high risk activity. However, the discipline of monitoring prices and news constantly is likely to enable assets to be sold much more quickly than most 'buy and hold' investors would ever contemplate. Hopefully, this means that potential losses ought to be limited. There is never a guarantee of this, of course...

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6 Great Subjects For Learning About The Stock Market

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