If you're getting tired of working, you may be tempted to speed up you retirement by playing the stock market, hoping to cash in big time and end up with a yacht and your own island in the Pacific. However, though the get rich quick schemers will have you believe it's easy to get rich on the stock market, the reality is that far more people try it and end up losing their entire life's savings. Read this article before you dabble so you don't become one of them.
Understanding the basics of the stock market is easy. Each company sells shares which entitle the people who buy them to a small percentage of the company's profits. Depending on how well things are selling, the parent company's stock will be worth more or less. Trading stocks means buying them when they're worth less and selling them when they're worth more. It sounds easy, but not everyone can do it.
Why? Because just because a stock is cheap doesn't mean it will eventually be worth more, and just because a stock is expensive doesn't mean it will become cheap if you watch it long enough. The trap you are likely to fall into is the same one that traps most amateur stock traders: being reactive. Because they want to make money, they will blindly sell whatever they have the instant the stock price starts to drop just in case it never goes back up.
The people who end up making money on the stock market are the people who are able to anticipate which stocks will go up in price and which ones will go down so they can sell before the price starts to drop and buy before it starts to go up. This sounds easy but is tricky, because how are you supposed to predict the refinance that sunk one company or the gold strike that made another?
The answer is to do research - a lot of it. Much more than you should be able to do while also working. This is why stock brokers get paid the big bucks - they do their research and are able to make accurate predictions. Therefore if you really want to have the best chance you need to do the research yourself or hire someone who has to advise you. Don't count on making it rich either, be content with a gradual increase in funds unless you're okay with potentially losing it all.