When not to invest

We would all like to make our millions on stocks. One of the miracles of the economy is the stock market and its abillity to generate wealth. You invest in a company and if they grow, your wealth grows. Sounds pretty great, right? But is it really that simple? Many of us have watch how in recent years the economy has gone up and down like a roller coaster. One day we hear of this or that new product and its effect on the market. The next we hear talk of huge loses.

At times the market seems to be steadily growing, while at others it clearly seems to be on a lengthy downward course. With so much volatility you want to be sure to understand when to invest and when not to invest. Perhaps the most important question, however, is when not to invest. Investing and breaking even is not so bad. Investing and loosing half of your life savings is another matter. If you want to be smart about investing, and I think all of us do, you need to consider how you are going to avoid those bad times to invest. Here are some tips that should indicate when it is a bad time to invest:

1. If you don't know what you are doing. This might sound obvious, but many people play the stock market these days, hoping to make it rich. They don't know much about the companies they invest in. Often times they find themselves loosing large sums of money, unable to understand how this could have happened. While there are definite market factors that might suggest that it is not a good time to invest, most of the problems arise from the investor not knowing enough. A good investor can probably invest at almost anytime and find some sort of good deal. However, if you don't know what you are doing, there will rarely be a good time to invest.


2. If you will need the money back in the next couple of years do not invest. Most investments pay off if you can keep them in the stock market for atleast five years. The market makes money, but it tends to do so over the long run. If you need the money you are about to invest back in the near future beware. The economy might tend toward recession, meaning that it will slow down and stalk prices will fall. If you need to liquidate your stocks at that point to pay for something else you will be in big trouble. With prices much lower you will much of the orignal value of the stock, potentially loosing thousands of dollars.


3. Do not invest if you do not know enough about the company or their product. Don't just rely on numbers. The companies stock performance might appear great, but you never know if their next product will be some sort of disaster. Research the company history and talk to someone else who knows. Be careful investing in stalks that appear too good to be true. Most of these will probably only loose money. Good, concervative stocks pay of slowly, over time and not instantaneously.


4. If you have not consulted an expert about market conditions. A bear market (economic slow down) is not necessarily a bad time to invest if you have patience. This is a time when stock prices or other prices are low. However, you should always talk to an analyst about where they think the stock will go in the near future. Be aware of potential sudden changes.