So first off let me say that I don’t gain much if anything if you start investing today, but I would be lying if I said I didn’t at all. I am both a private and public investor and for investing in the public sector through my Scottrade account if one of you were to buy millions worth of a stock that I currently own, my shares would most likely go up. Shares would go up very very little but none the less.
I write this simply to try helping ensure a healthy economy for all of us when we are older and our children all grown up and who knows where our government’s financial standing will be the at that point.
Why Everyone Can Invest:
1. Stock brokers are not just in Wall St. – Services like Scottrade have Apps that make it easy to buy, sell and understand your “portfolio” or collection of companies you have bought shares from.
2. Fees Are Affordable Meant For A Minimum Wage Earner – Don’t be afraid of the costs, buying and selling have one fee, mine is at $7 per trade which is reasonable considering they have offices throughout meant to be a resources for questions, their app and website work together updating each other.
3. You Don’t Need Millions - There are companies who don’t have that much potential in contrast to others. Consider this made up company UWBW, that sells underwater basket weaving lessons on DVD… not many will buy them therefore their market cap (control in a market) will be small…specially in contrast to IBM, who builds and markets all kinds of electronics to many different types of consumer. Maybe with $25 plus the $7 fee you would be able to buy 7 shares at for example $3.50 each… AND LET ME TELL YOU, DEPENDING ON THE COMPANY, 7 SHARES CAN BE REALLY GOOD INVESTMENT!
CONSIDER TESLA THAT STARTED TRADING AT ONLY $16… NOW IS WORTH OVER $220 PER SHARE.
4. There are no minimums - You can open an account, then fund it with only $1 if that’s all you have… little by little add more and more and until you have an amount that you feel is good for a particular stock you want to buy and how many shares of that.
5. Tax free – If you buy and “hold” for over a year there is no tax on any gains that your shares have given. Technically that’s because the gains are not realized until you sell the shares for that profit, but if you sell after a year of owning the taxes are still less and if you compare to income tax you pay every week… gains tax is lower!
6. We all come across random money from time to time - Either through a raise, a garage sale, car sale, bonus, lottery tickets, and raffle at work, etc. Instead of doing what we tend to do which is use that to go spending spree at the mall or buy one more case of beer for the weekend or more soda cases or that pink Coach purse you saw last week… Use at least some of that to start investing and start putting some easy to come by money to work for you.
Why Everyone Should Invest:
1. Would it be smart not to? - Because is so cheap to buy, and no minimum you really don’t have an excuse not to, especially if you spend some money a week on soda, McDonalds, Cheetos, beer… etc.
2. The market will always trend upwards– Although some companies will be a bad investment from time to time, the Market will always rise in value. Back in 1929 the DOW Jones (one of the key players in facilitating trading) was at 299.5 after the Black Friday Market Crash but now over the years is at about 18K points. This means that historically, even with bad economies and the so called “bubbles” the shares that you buy today will go up in value and be worth more by when you retire.
3. Social Security is NOT Guaranteed – People take two sides on this.. either it will run out or not but the truth is that just like free medical benefits this government subsidy was meant to encourage people to spend more into the economy making our country better in many ways but it has proven to cost the government more and more each year instead of benefiting us as a country and is reflected in loss of jobs, higher taxes, less government spending in other areas, etc. And just like the free medical that just turned into mandated subscription, known as Obamacare... Social Security too can be turned into a mandated savings account for each person because is not something that the Government has to provide, so they can easily tell us all that the free ride is over, or give you a reason when you retire on a case by case basis as to why you don’t particularly qualify for SS… is not mandatory and for such it can be lost or turned into a forced savings account for us all at any moment. My point here? That SS will most likely not be there for those of us in our 20’s or even 30’s… and if is there it will be a lot lower than it is now. I personally don’t believe it will be there because the funds for that now are already coming out of other budgets and loans from other countries.
4. Savings Account costs you money – YES, even the free ones! This is particularly important for someone on a tight weekly budget! Consider this: Inflation, which is the change in price from one date to another in the future is relatively high and constant year by year… $0.99 cents could buy us a bag of Hot Cheetos in high school!!! Do you remember? What about the 0.25Cent gum? Now a bag of Hot Cheetos is like $1.49 or something! THAT IS A 50% INFLATION SINCE THEN.
The idea is simple, 1 dollar today will not buy you the same thing tomorrow. If you don’t invest your money and have that $1 generate at least the same rate of inflation so that it continues to buy you the same year after year you are losing money…If you keep your money in the savings account, the cost of having your money in a bank is a bit more than just inflation but also the opportunity cost because the bank uses that dollar you deposit to lend to other people and make profit with their loan interests… so your money is working for someone else! That is costing you money!
5. Compounding is like Magic! – It takes a lot of time save $1 million! A lot less to get it by investing your savings! Some companies pay you 4 times a year a certain percentage, yield %, for owning their stock… this can drip back onto buying more shares each time… earning more interest on that new balance owned… little by little year after year that yield will be more and more, especially if you add yourself more and buy more by adding more savings as you can… Mutual Funds are great for this!
6. Yields are like free money! – There is no such thing as free lunch! We know that and is true, but If we forget about the opportunity cost of owning one stock versus another… once you have bought a particular stock that gives you back in form of yield… whether or not the shares go up, you will receive payments for each share you own from a company. This yield is profit money that is meant to go back to the investors, because you as investor are co-owner of a company and thus have rights to profits. Typically range from 1% to even 8.12% (SPH) or more depending on the industry and company, per share! Just pay attention because not all do…in fact I think is less than half of them that do but there are thousands of companies and funds and other securities out there.
Ok, here is one more reason why you should invest!
7. It can encourage responsibility! – As you invest, you can find yourself trying to spend less on random junk so that you can maybe buy one more share! This is true for me and due to nature of investing, the rush similar to gambling, I think many of you will too try to be more responsible with your money as you begin to invest. I think is just as important and can have a good domino effect in your life!
You will always find reasons for why not to do something, the idea is to not fall in the trap of doing what everyone else is doing and thus end up like everyone else when they are old. Put you money to work for you via investing in the stock market, secure your future, earn some tax breaks, and make some spending money.
The only reason why something is always scary is because you haven’t tried it and don’t know much about it but the stock market is not a living thing, is you and me, is the dollar we spend at the store or save or invest… whether you know it or not you are part of the stock market so why not take advantage of it and maybe buy into companies that you already consume from? Like cable, beer, purses, fashion, internet, cars, tools, snacks, etc… buy shares and watch them grow and also receive yield on those shares as you also continue to support them by consuming their products! I have learned to do this and started with very little, now I put my money to work just as I get to work every day and the stock market is just one way I do this.
Warren Buffet, possibly the world’s best investor, always says that a man who took a risk with $40 of share of coca cola with yields reinvested and compounding…would now be worth about $10 million!
Consider what industry is consider a gamble right now and maybe speculate on it and in 15 years have a couple of million to spend! I personally think that industry for us now is 3D printing and Self-Driving cars and its technology. While the current bubble is built around “fracking stocks” you know… gas, oil, etc.… buy companies that benefit from low oil prices like air lines or plastic based manufacturers… new companies emerging because of fracking and turn a quick profit on them these coming year.
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