Every time I get into a conversation about stocks or the stock market in general with a friends or family members the results are the same every single time without fail…
- At least one person brings up the fact that choosing individual stocks is a fool’s game. Then they go on to reference some book or article they read on the topic way back when, which instantly made them an expert.
- Another person swears up and down he or she doesn’t have the education or motivation to understand the stock market let alone analyze individual stocks. Therefore they defer to recommendations from their broker or financial advisor.
- The other person simply contributes to their 401k or IRA and forgets about it until they near retirement.
These are the most common responses I get whenever I start talking about the stock market and the opportunities it offers individual investors. Before I get into the advantages and reasons to invest in the stock market I want you to sit back and do a quick exercise.
Financial Asset Exercise
- Did you use credit to purchase these items? Are you still making payments on these items?
- Do you still own these items?
- Have any of these items appreciated in value?
- Have any of these items generated any income for you?
When my wife and I did this exercise years ago the results were astounding. It was hard to even think of purchases we made five years ago which drove a hard point home. 95% of the things we purchased were of no value to our family or our future. The only thing that could come close to being of value was the home we purchased, but the cars, cds, tvs, kitchen remodel, and computers did nothing but take money out of our pockets. Not to mention that their notoriety quickly wore off, that new car quickly became “just another” vehicle we drove and those cherry cabinets quickly became “just another” place to store our kitchen ware.
Please do not get me wrong, everyone needs a car for transportation, but do you really need a $35,000 car when you could easily get by on a reliable $15,000 car? The same thing with a house, how much square footage do you really need in order to live comfortably?
Purchasing a stock the right way (include link) leads to acquiring a financial asset that will put money into your pocket over the course of your lifespan. Therefore every dollar you invest has the potential to multiply 100 times over.
What Is A Stock?
Before answering why someone should invest in stocks, I believe it is prudent to accurately define what a stock actually is..
A stock is not a piece of paper that rises and falls in valuation on a daily basis. Instead, a stock is a portion of a business. Owning a few shares may be a very small portion of a business and owning millions of shares may equate to a very large portion of a business. But at the end of the day you are part owner of a publicly traded company and will receive income/profits from the business.
Invest In Yourself & Invest In Your Family
I understand that we all work hard and feel the need to reward ourselves for our efforts. But these purchases do nothing to increase your wealth or secure your future.
Chances are I’m not telling you something that you don’t already know, but I challenge you to hold yourself accountable. Save at least 10% of your after tax income and invest in stocks. These stocks will slowly accumulate over time, moving you and your family towards wealth. These stocks can be passed down from generation to generation, used to make down payments on your children’s homes when they start a family of their own or for whatever you may choose. Anything is possible when you invest in your future. Stop investing in someone elses.
My point is simple. Invest in yourself, invest in your family, and invest in your future.