Of course, the answer to the above question is 'yes', but it comes with a heavy dose of 'but be careful' and a side order of 'you may lose everything' so here's a run down of what you need to know before punting your hard earned cash on shares.

First of all, It's worth pointing out that there are many ways to win and indeed, lose when you invest in stocks and shares and so you need to decide which type of trading is for you from the outset.

Everyone I talk to about this usually say that they want the biggest possible return from the lowest possible risk. If this is your personal choice then I would simply advise that you stick to putting your money in a bank investment scheme and walking away.

There is no such thing as a 100% safe investment (and boy, do we know that now!) and so you shouldn't be expecting that ever to happen. With every investment there will be some element of risk, but let's not forget that the upsides can be fantastic.

Shares vs banks

I don't want to get you too excited about it, but let's start with some startling figures. The stock market usually goes up or down by a couple of percent a day. Now I've highlighted that because it's a big number. A couple of percent a day is a massive change if you have money invested in it and if my shares jump by 1% in a day, I'm excited. Here's why.

Banks are currently giving interest at around 2-3% per year! Get it now? Even at their peak they were only giving around 10% and so it can be seen quite clearly that if you can get your investment right, you can very quickly beat a bank return.

Even so, many people make a lot of money on this bank interest if they have enough money in there, so how is that done? Well, possibly one of the most powerful laws of finance kicks in when you have a decent pot of cash - compound interest.

If I have a thousand pounds in the bank and it earns 10%, the following year I will now have 1100 to invest. If it makes another 10% then that is calculated on the new balance and so my pot, in the second year swells to 1210, an increase of £110. The third year increase is £121, get the idea?

Compounding example

Let's take it even further and look how our 1000 can increase over eight years:

Initial Investment 1000
Interest Rate 10

Year 1000
1 100.00 1,100.00
2 110.00 1,210.00
3 121.00 1,331.00
4 133.10 1,464.10
5 146.41 1,610.51
6 161.05 1,771.56
7 177.16 1,948.72
8 194.87 2,143.59

So in a year, we've doubled our cash. Easy huh? Now, consider the sort of returns we could make if we were to get this sort of increase weekly.

There you go, that's what makes the stock market so lucrative and why so many people get involved, the returns can be phenomenal. However to every upside, there's a downside.

What could I lose?

This really depends on how you're investing and the type of stocks you're getting involved with but in general, most people could potentially only lose what they are willing to put in. For example, if I invest 1000 pounds in the stock market, I should expect to lose it. If I do, then I won't be shocked.

However, there are some types of trading where you could lose a lot more. I won't get into them here as many people reading this won't be considering it, but suffice to say, if you are considering getting into any stock dealing, read the small print!

OK, dead easy this and even though it sounds flippant, it's absolutely bang on the money and correct. The rule to good trading is:

Buy when shares are low, sell when shares are high.

There you go. Go do it.

OK, easier said than done, but with a bit of insight, you could actually use this extremely simple formula and end up in the money. Here's how.

Choose your trading style

This is very important and something you should consider right from the outset. There are many ways to trade shares, but I'll cover just a few:

• Share clubs
  
  Share clubs are a great idea if you just want to learn a bit about the stock market in a relatively safe environment and also don't want to risk all of your own money. You essentially share the risk of all trades and therefore nobody is losing everything in one go.
  
  There is generally more money available too, so you can spread your risk across a number of shares and investments.
  
  You won't get rich quick though. Clubs are slow to take returns and it will be a long time before anyone makes a profit. Also, you may see investments made that you just don't agree with - it's a democracy so you can have a say, but it doesn't mean people will listen.
  
• Full service brokers
  
  Personally, I hate brokers. The idea that someone else might have a better idea how to invest my money is ridiculous. Just look at what's happened the past year - would you trust them? Seriously, if you're investing, invest yourself.
  
• Personal trade account
  
  My favourite and the one I'll discuss here and in further hubs. Do it yourself is always the best way. You keep the money, you take the risk but importantly, you can move quickly and trade when you feel like it.
  
  The downside here is that you need to know what you're doing, but in the next few hubs I'll give you some tips on how to do that. Really, it's dead easy.
  
  
• Robots
  
  Another favourite of mine and I'll cover these in detail. If you absolutely have no idea of what to do but want to make a bit of money then these may be the way ahead.
  

So choosing the style of trading is absolutely essential if you are going to take this seriously (and you should) and it needs to fit in entirely with your current lifestyle. If you haven't got the time to spend on checking out your shares and making trades then don't consider doing it yourself.

If you're no good in groups and hate the idea of not being totally in control, don't join a share club. It's easy really so go make that decision and if you decide you want to do this for yourself, prepare to learn the ropes!