The real reasons why you should invest in the stock market.
And they aren’t ones you might think!
First off, let me dispel a primary notion about trading stocks as an individual: you will not get rich by investing in individual stocks without amazing luck or timely (and hopefully legal) information.
Most trades take place in bulk by computers running algorithms, so individuals are competing against machines which act to market changes in a fraction of a second.
It is incredibly risky to put enough money into a company that would turn into a huge profit.
Humans are emotional, so we tend to buy when things are good, sell when things are bad, and hold when we believe in something even when the facts tell us otherwise.
You cannot predict the future (i.e. bear or bull markets) or ever know as much as professional research analysts, fund managers, or other “insiders” of the industry.
So, why trade stocks?
Picking stocks isn’t just about money, it is about learning.
Learning about markets, business, finance, and savings can help anyone gain the knowledge and confidence to build an effective long-term investment strategy.
By beginning to pick individual stocks, you become accustomed to some of the terminology around investing, you are exposed to different sectors (ex. technology, manufacturing, banking), and you start to see how some stocks may rise together or move in opposite directions. In other words, you will begin to understand the purpose of diversification (i.e. reducing risk with a portfolio of stocks) in a fund (i.e. a collection of stocks), that value of mutual funds, and how to ride the ups and downs of the market with some sense of emotional distance. Franky, the money invested is there to keep you motivated to learn, stay connected, and have some skin in the game.
The world of money, finance, and economics can be overwhelming, has dense complex language and concepts, and make so many people feel like outsiders. This causes people to follow bad advice (ex. contributing to a 401k is always the best tool for retirement success), chase weak leads, or just avoid conversations all together and trust someone else or hope for the best.
Thus, the goals of starting to pick stocks are:
Keep investing and money management in the forefront of your mind
Start reading and talking about finance and business (knowledge is power!)
Increase ownership of, and confidence in, working with your own money and any financial professionals
Start a new hobby
Maybe make some money
Just like entrepreneurship, there are more failures than winners, so don’t be disappointed if you “lose” the battle of picking individual stocks. You will have learned about how to win the war of long-term investing success by understanding different funds, business sectors, and the wide variety of possible investment opportunities.
Note: The money I’m advocating people invest in the market as an individual should be considered “extra” cash. This is money that would have otherwise gone to discretionary spending (ex. restaurants, clothing, technology) and never money that you need for necessities or savings.
You can use any platform to begin that offers free trades and other no fee services.
For people looking for a simple interface and easy entry: Robinhood (Bonus: you get a free stock!)
For people looking for a full featured platform with research tools: TD Ameritrade
Disclaimer: This article is independent of advertising. All opinions, reviews, and advice are solely mine. All investments carry the risk of loss and it is up to the individual to fully understand any risks before proceeding. Any product or service recommended here may not be the best for all users or the best in the industry, so individual users should always conduct their own research before committing.