The stock market has proven to be a happy hunting ground over the years for many investors, with some creating substantial fortunes.<\/p>\n
While some investors still bear the scars from the Global Financial Crisis, others perceive the stock market to be a gambling mecca, where fortunes are lost or made overnight.<\/p>\n
First and foremost, when I speak about the stock market, I am referring to the blue-chip companies such as our big banks, mining companies like BHP Billiton and RIO Tinto and some of Australia\u2019s largest organisations such as Telstra and Woolworths.<\/p>\n
The smaller \u201cspeculative\u201d companies can be highly volatile and don\u2019t fit the criteria for sound and reliable investment strategies.<\/p>\n
The capital appreciation of a share is the obvious staple for making money in the stock market and how it works is very straight forward.<\/p>\n
You buy a share and if it increases in value you will make money and if it falls in value you will lose money. Just like real estate, right?<\/p>\n
This is correct when you are comparing the two types of investment on face value, but the advantage of the stock market is that there is an absolute value attached to your investment that is completely transparent.<\/p>\n
The truth is that property valuations can fluctuate just like shares, but because the true value at any given time is not so transparent, investors are generally more relaxed about price movements.<\/p>\n