Why should people invest? There are a lot of tales telling you why it’s a bad idea, but we’re about to take them down with some facts.
Why should people invest? It’s a good question, especially given the multiple financial collapses that seem to roll around every 10 or so years. Heck, you don’t have to be an economic historian to realize that the 2008-2009 crash depleted retirement funds around the globe. Or there was the 1987 crash, the 2001 dot-com crash, and the coronavirus crash that’s way too fresh in everyone’s mind.
There’s also the assumption that it takes a lot of money to invest. Or people fear that insider trading will gobble up the profits before regular investors can take a bite. Some people believe successful investing is all about luck or getting in at the right time.
Not looking too good, is it? It’s easy to look at that and think that you’re much better off hiding your money under the mattress. In some cases, that might even be true. So why should people invest? Because most of these assumptions are pure myth. And it’s time to debunk them.
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.
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Why should people invest in the stock market? It’s time to turn the light of truth on some of these misleading myths.
The myths that keep people from investing may have been correct at one time. But times have changed, and it’s much easier and affordable for individuals to enjoy the benefits of investing. Unfortunately, some of these myths are stubborn and won’t go away. So let’s open them up to a little scrutiny, starting with the BIG investing myth:
Myth #1: You need lots of money to invest.
Fact: Some mutual funds require minimum investments of $1,000 or more. Some individual stocks can be in the hundreds or even thousands of dollars. There are also a number of decent stocks out there that you can get into for less than an evening out at the movies. And even some of the best stocks and ETFs started out with share prices in the teens and even lower.
Myth #2: You have to invest through a broker.
Fact: You certainly can invest through a broker, but thanks to businesses like Robinhood, TD Ameritrade, E*trade, and others, investing is as easy as opening a bank account. It might even be easier since you don’t have to leave your couch to do it. Once you set up and fund your account, you can start buying and selling stocks.
Myth #3: It costs money to invest.
Fact: This is sort of true, but sort of not. In the days before online investing, you did need to pay a broker for each trade. That made it more expensive to buy and sell stocks. It could even be counterproductive if you weren’t making profitable trades. But now, many trades are commission-free. You can buy and sell ETFs, stocks, and bonds, all without paying a commission.
Myth #4: I can’t compete with professional investors.
Fact: You don’t have to. A mind-boggling number of stocks are bought and sold every day. The “pros” don’t necessarily buy good stocks and keep them all for themselves. They might sell great stocks because they need cash or there’s something else they want to invest in. Never mind the fact that even some of the biggest names in business may have billions of stocks outstanding (meaning available to buy) at any given time.
Myth #5: I’ll lose all my money.
Fact: Why should people invest if they might lose all their money? Obviously, they shouldn’t. But if you’re careful, diversify your portfolio, and choose your stocks wisely, and – this may be the most important factor – set loss limits (say, 15%), on all your stocks, then the chances of going broke are pretty limited. Will you make some bad choices along the way? Absolutely. Will you sell a stock too soon and miss out on a big gain? Yup. Will you buy a stock just before it tanks? Count on it. But you’ll also buy stocks that go up and up and up. You’ll buy dividend stocks that reward you with cash several times a year. You’ll find a market darling before anyone else and make some serious bank.
There are no guarantees in the market. But the fact that you’re here means you’re already on the right track. The barriers to investing have dissolved almost entirely in the past several years. The real trick is to learn as much as you can, don’t dump all your eggs in one basket, and start slowly.
And to honestly answer the question of why should people invest: It’s one of the only ways to make your money work for you. We’re happy to help you make smart choices. Browse the cabotwealth.com website and then take a look at our 15 investment advisories, where our analysts routinely pick winning stocks that beat the market year in and year out.
What questions do you have about investing that you’d like some clarification on? Let us know in the comments.