People invest for different reasons. Those who don’t invest at all have their own reasons as well. For some, it’s mostly the lack of money that’s the driving factor. There are also those who don’t want to invest because they want to protect their money from loss. That’s a legitimate reason to be afraid of the stock market. But the most common reason why people don’t invest in the stock market is because they just lack the knowledge and tools to do so. If people were better educated about investing and its history, they’d be more likely to invest. Here are some facts that prove why you should never be afraid of the stock market.
The stock market is known for rebounds.
Yes, it’s true that the market crashes from time to time. It also sees a lot of dips and falls. But equally, the market sees enough ups to keep investors going. Even more, each time the market has fallen throughout history, it’s gotten right back up and even stronger than before it fell. It’s all a matter of physics after all: anything that comes up must come down, and when you’re down, there’s no other way but up.
Diversification is an option.
There’s no need to be afraid of losing all your money in one go because you don’t have to invest your money in one place. As a matter of fact, analysts advice against doing so. A well-diversified portfolio is the best way to grow your money and is one of the best ways to protect yourself from losing.
Stocks can help beat inflation.
Nobody likes inflation, but it’s our reality. The money you have now will not be worth what it is in 10 years, let alone 20 years. The only way to beat inflation is to get enough returns on your investments to create substantial growth, and the most powerful tool to do that is to utilize stocks. Stocks may be riskier, but we all know that the higher the risks are, the better your returns will be.
There’s power in compounding.
If you’re not familiar with the term compounding interest, you need to learn about it right away. Compounding is how your money will grow exponentially over time, especially when done properly. It’s also why everyone tells everyone to start investing early. The more time your money spends invested, the higher your returns will be.
Investing is long-term.
Whatever might happen to your money tomorrow, you’ll have to trust that your money will be okay in the long run, and if not okay, it might be better. You have to start thinking in terms of decades rather than just months or even years. Investing is the longest game there is, and you have to know how to play in order to stay in the game. There’s no need to be afraid of how things will end up tomorrow because you can look forward to the next couple of decades instead.
Everything is regulated.
It may be true that regulations can’t protect everyone. That said, regulations do protect a lot of people and their money on a daily basis. You can’t let a bad seed ruin the entire tree for you. The truth is a lot of people make money from the stock market by being informed and following regulations. Regulations will not only protect you from others, but they will also protect others from you. They are there for everyone’s benefit.
There are tons of stock options.
You can go with your guts. You can go with what’s hot. You can go with what’s recommended. Or you can go with what you’re passionate about. Investing in stocks is about being smart, but it also means that you can put your money where you’re most interested. You don’t have to invest in anything you don’t feel like. Your stock options are literally limitless.
You don’t need to put it all in stocks.
Stocks are great investments, but there are no rules stating that you need to put all your money into stocks. There are other ways to invest, and stocks are just one of them. There are mutual funds, bonds, etc. You can mix and match as much as you want. But there is a reason why people invest in stocks largely, and that gives us the next fact.
Stocks offer the highest growth potential.
Your money is more likely to double or triple or quadruple or more if you invested it in stocks. Most stocks return at an average of 10%, while bonds give half that number and other short-term investment return at around 3%. It makes a difference, especially if you’re aiming high.
The stock market really isn’t scary.
The worst thing that can happen in the stock market is that it can crash. But we’ve already established the fact first off that it will go back up again, inevitably. The only reason why the stock market sounds or feels scary is because you don’t know enough about it. Get educated and understand the terms, and you’ll soon realize that what you feared was just the things you didn’t know. If you knew the stock market like the back of your hand, you’ll know there’s absolutely nothing scary about it.