The stock market and real estate are the two biggest wealth creators in history. Did you know that a $100 investment over the history of the stock market would be worth over $700,000 today! With today’s online trading platforms and the wealth of knowledge that can be found at your fingertips, trading has never been easier. Check out the top 5reasons you are missing the boat if you are not currently investing in the stock market.
1. The Stock Market Offers a Tremendous Growth Opportunity
If you truly want to grow your wealth, you would be hard pressed to find a better place to do that than the stock market. Skeptical? Take a look at the chart below. It simply illustrates the exponential growth of the S&P 500 and how a $100 investment over the history of the stock market would yield over $700,000 today!
You’re not reading the chart incorrectly. The stock market yield is almost 70 times the yield you would have received in the bond market and almost 700 times the yield of inflation alone. Obviously, this is not straight-line revenue growth and there are clearly peaks and valleys along the way. If you are investing for the long haul, and not day trading, you can be fairly certain in continued steady growth.
2. Investing is Easier and Cheaper Than Ever
Opening up an online trading account is generally free, and you could begin trading with the money you spend on your morning Starbucks and breakfast sandwich! In fact, many of the larger online trading platforms have 0 trade minimums, $0 in platform fees and offer stock trades for less than $5. “But how do I know what to invest in?”, you ask. Most of the online trading platforms also provide research and data on just about every conceivable aspect of the various stock offerings. In addition, the Internet provides an enormous wealth of knowledge at your fingertips. The bottom line…you don’t need to be an expert, you don’t need to spend hours and hours doing research and you don’t need to spend an arm and a leg to invest in the stock market. The barriers to entry have never been lower and the accessibility to everyone has never been higher.
3. You Can Invest a Little or a Lot
Unlike traditional real estate investing, you don’t need hundreds of thousands of dollars. With a few mouse clicks and less than $50 you could be the proud owner of a blue-chip or premium stock. Still interested in real estate speculation or want to protect your money by investing in gold? With the advent of Exchange Traded Funds (ETFs) you can do just that. For a few dollars you can invest in real estate and commodities like gold and silver. The best part is that with ETFs you never have to take possession of the underlying asset and can liquidate your holdings at moment’s notice.
4. You Can Ride Out Stock Market Downturns
Fact: Stock market drops make everyone nervous. Now that we’re past that, let’s take a hard look at the facts and quiet our irrational fears. As you can see in the chart below, after every major drop in the stock market there has been an incredible rebound over the following 5 years.
In addition, when stock prices dip you haven’t necessarily lost money because you only realize that gain or loss when you sell the stock. In fact, when stock prices dip you are presented with a buying opportunity that allows you to average down what you paid for each stock in your portfolio. Moreover, when the market recovers, you are even better positioned for portfolio growth.
5. You Can Control Your Risk
Be the millipede! What does that mean? When a human loses an arm or a leg it’s a big deal. When a millipede loses a leg, they might not even notice. This same ideology applies to an incredibly important stock market concept called diversification. Diversification is simply the concept that spreading your investments around in multiple stocks and varying market sectors can alleviate a great deal of risk. If one market sector suffers you don’t have all your eggs in one basket and your other investments will help to balance out the rest of your portfolio. Unlike singular large investments in real estate, the stock market allows you to diversify easily without a great deal of capital.
Wrapping This All Up
Although past performance is no guarantee of future results, it’s a great indicator. Consistently high long-term yields, low barriers to entry and high liquidity make investing in the stock market more attractive than ever. Although getting started early in life creates the most opportunity for extremely high long-term returns, it’s never too late to get started. Thanks to the magic of compounding interest, even 5-10 years of investing can have a significant impact on your retirement. If you are just getting started in investing the best advice one can give is to trade on a stock’s underlying fundamentals for the long-term. Don’t invest too much to quickly and be sure to diversify your portfolio. This is not a sprint but an ultra-marathon so crawl, walk, jog and then run as your skill, comfort level and risk tolerance permit.
Reference
http://www.multpl.com/10-year-treasury-rate/table/by-yearhttp://www.multpl.com/inflation/tablehttp://www.multpl.com/s-p-500-historical-prices/table/by-yearhttps://www.fidelity.com/viewpoints/retirement/why-you-need-stocks
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You’re not reading the chart incorrectly. The stock market yield is almost 70 times the yield you would have received in the bond market and almost 700 times the yield of inflation alone. Obviously, this is not straight-line revenue growth and there are clearly peaks and valleys along the way. If you are investing for the long haul, and not day trading, you can be fairly certain in continued steady growth.
In addition, when stock prices dip you haven’t necessarily lost money because you only realize that gain or loss when you sell the stock. In fact, when stock prices dip you are presented with a buying opportunity that allows you to average down what you paid for each stock in your portfolio. Moreover, when the market recovers, you are even better positioned for portfolio growth.
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