Think You Don’t Understand The Stock Market? Think Again.

What’s stopping you from investing some of your hard earned money in the long-term super-engine that is the stock market?

In my experience it often comes down to the common misconception shared by many, ‘I don’t understand what the stock market actually is!’.

In a previous blog I mentioned that for most people the image that comes to mind when you hear the phrase ‘the stock market‘ is pinstriped suits, legalised gambling and Leonardo DiCaprio in The Wolf of Wall Street.

Well what if I told you that the stock market is actually significantly more dull than all of that.

And markedly less glamorous.

And not exclusively for the ultra-wealthy.

And not just for the financial literates among us.

The stock market should play a part in everyone’s financial planning journey.

Without it, you are going to seriously struggle to achieve your life goals.

The stock market is simply the vehicle that permits us to exchange current utility (read – any surplus income or savings we have) for future opportunities.

Be it retiring earlier than you would hope, taking a 6 month work sabbatical, helping your children get a foot on the property ladder, the list goes on…

Your objectives will be personal to you and your family.

But the common thread uniting all of us is that we need the stock market to get us there.

Without it, the Terminator of Wealth that is inflation will only ravage our hard earned savings and rob us of future opportunities, freedom and fun.

If you still need some convincing that you’re far more knowledgeable on the stock market than you think you are, read on.

ā° 6am – the alarm goes off on your mobile phone (designed and distributed by a company listed on the stock market). You snooze your alarm and roll over onto your comfy mattress that you purchased last summer from a company listed on the stock market.

You begrudgingly drag yourself into the shower (shower parts made by a company who purchases raw materials from another company listed on the stock market) and indulge yourself with your favourite playlist on the streaming service you subscribe to each month (brought to your ears by a company that is listed on the stock market).

šŸ§ƒ 6:30am – you down a glass of orange juice (produced and marketed by a household brand whose parent company is listed on a stock market) and rush out the door, before making the 25 minute commute to work in a car manufactured by a well-known automobile brand listed on a stock market.

ā˜•ļø 7:10am – you arrive at work with a skinny latte in hand, purchased from a well known high street coffee vendor who are listed on a stock market. You felt guilty about not supporting the independent cafe next door and promised yourself that you would head there tomorrow morning. If you do then you should be aware that the coffee they make you will be made using a machine produced by a company listed on a stock market and served in paper cups sourced by another company listed on a stock market.

šŸ„Ŗ 12pm – you escape the office for an early lunch, regretting the fact you didn’t make something at home in advance. With an important work meeting at 12:45pm, you’ve just about got time to swerve in for a meal deal in the nearby local supermarket (a company listed on the stock market) to grab a stale cheese sandwich and a bottle of black-fizzy-juice (produced by a well-known company listed on the US stock market).

šŸ’» 3pm- exasperated, you call your IT department at work to sort-out the technical difficulties you’re having on your work PC (made by a company listed on a stock market) before leaving the office at 5pm sharp to go for a drink in the national pub chain (listed on a stock market) 10 minutes from your office. Your colleague buys a beer (crafted by a well-known global brewery listed on a stock market). You’ve got the car, so you opt for a lemonade (produced by the same drinks manufacturer as at lunchtime and who are again listed on a stock market).

šŸ You arrive home at 7pm. It’s been a long day and tonight’s not the night to channel your inner Gordon Ramsay. For dinner you throw fusilli pasta into an indeterminate reddish sauce made by a global producer of consumables who coincidentally are listed on a stock market.

šŸ“– After a rushed story time with the kids (a book published by a powerhouse company listed on a stock market) you vegetate on your new three piece sofa, purchased from a famous Swedish home furniture giant, itself privately held but who relies on a frenzied logistical business model of distributors listed on a stock market).

šŸ“ŗ 9pm – Finally, it’s downtime, which means it’s time to argue about what to watch on the various streaming services you pay for (each of whom are listed on a stock market) on your flashy new 50inch tv, produced by… you get it… a company listed on the stock market.

So what lessons can you take away from this little story?

The stock market is all around us.

We eat, sleep, drink, purchase, smell, hear, watch, drive, cook… the stock market, every day of our lives.

Put simply, we are the stock market.

When you’re investing in the stock market and you don’t understand what it is you’re actually investing in, you just need to look around you to see the evidence in everyday life.

I call investing in the stock market ‘coat-tail investing’ because that’s what it is.

You’re riding along on the coat-tails of the most ingenious, innovative, inspiring companies across the globe.

The stock market is simply the means by which we move our money into said companies, and in turn hope we too will be rewarded by their journey to success.

And by distributing our hard earned cash across multiple companies across wide-ranging industries we can temper the risk so that investing in the stock market doesn’t become quite so scary after all.

So the next time you claim you don’t understand the stock market, you do.

Open your eyes and ears and the proof will be there.

And with that, I’m now signing off from my laptop produced by …

You get the idea...

Benjamin

Benjamin Mitchell

Benjamin Mitchell

Iā€™m a chartered financial planner that can help you plan for tomorrow and also live for today.

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