Stocks, in general, are best suited for long-term goals such as these:

_Achieving financial independence (think retirement funding)

_Paying for future college costs

_Paying for any long-term expenditure or project

Some categories of stock (such as conservative or blue-chip) may be suitable for intermediate-term financial goals. If, for example, you will retire four years from now, conservative stocks are appropriate. If you’re optimistic about the stock market and confident that stock prices will rise, then go ahead and invest.

However, if you’re negative about the market (you’re bearish, or you believe that stock prices will decline), you may want to wait until the economy starts to forge a clear path. For more on investing in bull or bear markets. Stocks generally aren’t suitable for short-term investing goals because stock prices can behave irrationally in a short period of time. Stocks fluctuate from day to day, so you don’t know what the stock will be worth in the near future. You may end up with less money than you expected.

For stock market investors seeking to reliably accrue money for short-term needs, short-term bank certificates of deposit or money market funds are more appropriate. In recent years, investors have sought quick, short-term profits by trading and speculating in stocks. Lured by the fantastic returns generated by the stock market in the late 1990s, investors saw stocks as a get-rich-quick scheme.

It is very important for you to understand the difference between investing, saving, and speculating. Which one do you want to do? Knowing the answer to this question is crucial to your goals and aspirations. Investors who don’t know the difference tend to get burned.