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Direct investment in stock market 'very risky'
27 February, 2008
The plight of Northern Rock underlines the risk of investing in the shares of just one company, it has been warned.
Rachel Lacey, editor of Moneywise Magazine's website, explained that shares in the nationalised bank are now worthless, meaning that people holding them will have lost all the money they had invested in them.
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She said: "We always say that if you want to invest in the stock market, the most sensible way of doing that is to do so via an investment fund, like a unit trust, as that way your money is going to be spread across a much bigger range of companies."
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Ms Lacey added that people should only directly invest in stocks and shares if they know what they are doing or if they can afford to lose the money they are investing.
The problems at Northern Rock began when it was forced to obtain emergency funding from the Bank of England which in turn prompted a run on the troubled bank as savers withdrew their money amid fears of a collapse.
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