You Need to Start Investing NOW! Pt II
Updated: Aug 16, 2020
In part one of this blog we touched why you should start investing, how investing allows you to participate in the success of companies you're familiar with, and the beauty of owning a business without running a business. In part two we touch on why some people have avoided investing in the stock market. We tackle these issues head on including the risk of losing money. To be an investor, and a good investor - which I'm sure you're capable of - you need to have all the information, the good and the bad..
So many people go their entire lives not investing because they believe the stock market is a scam, which is the mindset of someone who just doesn't understand how it works, and to be honest with you, that is by design. Yes, it's by design that you weren't taught about how the stock market actually functions, but that's another topic for another day, for now let's address the stock market is a scam issue.
The Stock Market is a Scam.
This mindset plagues a lot of people, According to Statista only 55% of American adults are investing, and of those people that are not investing, some have been told that the stock market is rigged or it's a scam.
One part of that last sentence is absolutely correct, the stock market is rigged. It's rigged for investors with patience to win in the end. It's rigged to take the money of anyone buying without an understanding of what they're buying and why they're buying it. It's rigged to leave anyone who believes they will get in, get out, and get rich quickly with nothing. I cannot deny it, it's definitely rigged. But I will argue against the stock market being a scam where only the rich guys win.
In part one I mentioned McDonalds and Johnson & Johnson, are those companies scams? Nike (NKE), Clorox (CLX), General Mills (GIS) the cereal manufacturer, Campbell the soup company (CPB), Dick's Sporting Goods (DKS), Target (TGT), Walmart (WMT), United Airlines (UAL), JetBlue (JBLU), Delta (DAL), Facebook (FB), Google (GOOGL), Netflix (NFLX), Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), these are all publicly traded companies. To say the stock market is a scam is to say the products of the stock market, the companies I've just mentioned are a scam, and you're smart enough to know they are not. You wouldn't buy scammy shoes to put on your feet, or shop at a scammy store, or fly a scammy airline would you? If your answer is no, then you agree with me that Nike,Target, and JetBlue aren't running scams.
But from speaking to new investors about why they didn't invest earlier we usually hear the same story. A friend, cousin, uncle, or parent got a stock tip, bought in - without doing any other research - the stock price went down, and they lost their money, but the person that gave them the tip made out very well from the investment. This story is centuries old, and the last time I heard it, won't be the last time I hear it. It's unfortunate that it happens, but remember what I stated earlier, the market is rigged to take the money of anyone buying without an understanding of what they're buying and why they're buying it. A stock tip does not qualify as understanding what you're buying and why you're buying it.
Something else we've gathered from speaking to people that have had bad experiences in the market, their market outcomes had a lot to do with their mindset around money.
We've listened to people who were used to paying top dollar for everything. Getting the most expensive watch, car, wardrobe, house, meal, drink, et cetera, because they could.
That mindset is counterintuitive in investing.
Investors don't make money when they purchase shares of a company