It is probably safe to assume that you are familiar with the stock market. People talk about all the time and most of us are invested in it whether we realize it or not. If you have pension or insurance or a mutual fund you have money in the stock market. Therefore it is a good idea to make sure that you understand how it works.

As investments go the stock market is probably the best known, in fact to many people it is investing. What the stock market does is allow you to own a tiny piece of a company. The idea is that as the value of that company increases the value of your stocks increase and you will make money. There is of course always the risk that the value of the company could decline and the stocks could go down. This is why you don't want to put all of your money into the stock market.

The question that needs to be asked before you start investing in the stock market is how much of your money should you be putting into the market. This is not easy to answer since it will depend in large part on your risk tolerance and your age. As a rule of thumb you should not have any money that you expect to need in the next ten years invested in the market. This is because there can be some very large fluctuations in value and you need that much time to allow the market to recover from a decline. If you are young enough that you don't expect to need any of your savings for the next ten years you still want to make sure that you have reserve fund for emergencies.

One of the reasons that the stock market is such a popular investment is that it offers the best returns of any of the major investment opportunities. Historically the market has risen considerable faster than anything else including real estate. That being said it is hardly a straight climb up, the price of stocks can fluctuate dramatically. This is something that you have to understand if you are thinking about investing in stocks. One of the biggest reasons that people lose money is that they panic when prices go down. It is this panic selling that costs people more than anything else.

There are a lot of people who stay away from the stock market because they think that it is too risky. There is nothing wrong with this approach but it does show a misunderstanding of how the market works. Investing in the stock market can be very risky or very safe depending on how you do it. The problem is that far too many people follow very high risk strategies. You would be much better off learning about the safer strategies that will make you more money in the long run.