Why the GameStop Affair Is Good for the Stock Market
There's been a lot of hand-wringing about the havoc last week's GameStop Affair wrought. I see it in a totally different light.
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Investing in the stock market has always been an effective way to build wealth. In today’s low interest-rate, it has become a necessity.
Since the Great Recession in 2008, the Federal Reserve has kept short-term interest rates—called the “federal funds rate”—at or near zero. That means the traditional ways of saving your money and watching it accrue—certificates of deposit, money-market accounts, Treasury bonds—are no longer viable. Investing in the stock market is one of the few viable ways to have your money work for you these days.
Of course, stock market investing comes with more risk than a safe, low-yield savings account. Inevitably, not all of your investments will be winners.
In investing, no one really knows for sure what’s going to happen. Over time, however, stocks tend to rise. History tells us this. Since 1928, the average annual return in the S&P 500, the benchmark U.S. stock index, is 11.5%. So historically, the average stock rises 11.5% per year.
Successful investing is largely dependent on market timing. You can’t just buy any stock and assume it will turn a profit, much less return 11.5%. You have to buy the right stocks at the right time.
For example, if you bought stocks in 2011 and sold them at the end of the year, you probably didn’t fare so well. The S&P 500 was essentially flat that year. However, if you bought stocks at the beginning of 2012 and held on to them through 2014, you probably made a lot of money. The average annual return from 2012 to 2014 was 20.5%.
But, of course, your return would have depended on what stocks you actually bought. Take Apple (AAPL), for example. The largest and most recognizable technology company in the world has been perhaps the single best-performing stock of the past decade. But Apple had a rough stretch from September 2012 to June 2013, falling more than 43% at a time when most stocks were reaching record heights. The rising tide of the market doesn’t necessarily lift all boats—even the biggest boat.
That kind of unpredictability scares some people away from investing in the stock market. The track record over time should be enough to convince you otherwise.
The stock market is a vast and ever-evolving place, and there are many ways to approach stock market investing.
Want to invest in safe companies that offer a steady stream of income? You’re probably a dividend investor.
Are you willing to take on a bit more risk to go after bigger, faster rewards? Growth investing is likely for you.
Value investing is for investors who like to bargain shop.
Options trading is for those who like to invest based on statistical probabilities. And so on.
At Cabot Investing Advice, we have something for every investor. We publish 12 investment advisories that cater to various types of risk tolerances and timetables, depending on your preference. Since 1970, we’ve been helping investors of all experience levels achieve market-beating returns, helping our readers double their money 28 times over.
When done right, investing in the stock market can be a hugely profitable endeavor. For nearly a half-century, we’ve been helping investors maximize those profits—and hope to continue doing so for another 50 years.
There's been a lot of hand-wringing about the havoc last week's GameStop Affair wrought. I see it in a totally different light.
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You've seen what a collaborated effort to snatch up beaten-down stocks can accomplish in the short term. Here's what typically happens next.
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In this week's video, Mike Cintolo discusses the wild action this week--he's seen some suspicious (and a little abnormal) selling, but he's also seen a lot of stocks find support at key levels so far.
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Certain sectors are about to get a jolt of energy from the post-Covid recovery. Others aren't. Here are three reopening stocks to avoid.
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In this week's video Tyler Laundon talks about the big picture of economic recoveries and how they tend to run much longer than investors think.
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Mike Cintolo talks about his bullish stance, but he's also seeing few stocks at good entry points and also a bit of churning among some leading stocks.
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With so much uncertainty in the market, today I want to discuss my five commandments for selling short - before you need to use them.
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Mike Cintolo talks about the market's positive start to the year and his still-bullish stance.
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Fears of "draconian" legislation have pundits believing a Democratic government will be a disaster for stocks. History says otherwise.
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Index divergences like the one we saw between the Nasdaq and the S&P 500 and Dow are rare. In fact, it's only happened three times this century.
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The current stock market is creating huge opportunities to invest - even during a pandemic. And unless you majored in finance or are a stock broker yourself, you may not feel confident enough to start investing on your own.
This free report aims to give you the confidence - and the right know-how - to dive right into the stock market. We'll show you how.
Download it today, FREE when you sign up for our complimentary Cabot Wealth Daily advisory!
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