If the image that comes to mind when I mention the ‘stock market‘ … is one of dread, centred around legalised gambling, pin-striped suits and Leonardo DiCaprio, then you’re not alone.
Many of us simply don’t understand what the stock market is, let alone how it relates to our everyday financial planning.
Some think it’s above them and not for the everyday saver.
Unless you’re a day trader in London haggling over the futures price of wheat, you shouldn’t really concern yourself with the beast that is the stock market.
The stereotypical image of the stock market goes hand in hand with dabbling in high risk investments, and for most people this is enough to put them off even attempting to comprehend the value to be sourced from investing in it.
For the more risk accepting individual(s), a lack of understanding and knowing where to even start can be enough to sidetrack any best laid plans and diarise them for the elusive date of … ‘tomorrow’ 🤷♂️
And so the cycle continues.
Thousands, if not millions, of people who should be investing in the stock market aren’t.
And to help ourselves sleep at night and deal with this blasphemy, we whisper unconvincingly to ourselves:
‘My money is safer in cash in the bank. Cash is good.’
I get the thinking.
Why would you give yourself stress and worry when the savings account that is your mattress already offers you peace and tranquility?
So I’ll put it to you …
That the real risk to the long term growth of your money 📈
And more importantly
➡️ Your future ability to seize life opportunities/acquire freedom/achieve independence/enjoy peace of mind/I-can-go-on…
Isn’t the risk of market fluctuations and losing all your money in the stock market.
But is instead the risk of low returns over time in cash.
Why don’t we ever talk about that in the news (*read – Never Ending Worry Service*)?
The more damning images of personal finance armageddon are often stories of market crashes and diligent investors who lose their entire life savings when Company XYZ goes under 💥
Why aren’t there news headlines reporting the fact that leaving your savings in cash is equivalent to accepting you’ll be poorer tomorrow than you are today and you’re haemorrhaging value.
The terminator of wealth that is inflation is what you should really be worrying about.
The risk of low returns is a far bigger risk to your long term planning than any misinformed risks that the stock market brings.
The stock market is simply the vehicle that offers your hard earned savings the chance to really grow.
And if you’re sensible with your investment strategy (which means diversifying appropriately, investing in low cost passive funds and keeping an eye on your costs) then the stock market is quite simply … a gift.
I often call it ‘coat-tail investing’.
Because when you’re investing in the stock market you’re not gambling.
You’re riding on the coat-tails of the smartest people in business and the most innovative, ingenious, inspirational companies out there.
You don’t even have to do anything.
You’re merely just along for the ride.
But for those of you that still don’t quite understand what the stock market is, I’ll cover this in a future blog.
Episode 7 of my podcast will help give you the foundations in the meantime and will already put you way ahead of most people.
The reality is we are all already invested in the stock market, one way or another.
Many are ignorant to this fact.
So when people say ‘I don’t understand the stock market’, you just need to look around you to find your answer.
Be it the clothes you buy, the food you consume, or the car you drive…
One way or another it always links back to the stock market.
Is that gambling?
I would argue that seems pretty safe to me.
Until next time.