The market works much differently than what you hear on TV. Discover overlooked reasons you should invest in the stock market.
A few weeks ago, I went to the Western Regional Dental Convention. Before hitting another 8-hour shift at our booth, I turned on the TV to listen to some market news. They were discussing the “trade” of the day, which would prevent investors from losing money and help them juice up their returns. The advice was heavy on emotion and light on common sense.
Can you really outsmart your peers, gain above-average returns, and avoid the pain of market downside? Nope. The truth about how the market works is much different than what you hear on TV. The real reasons you should invest in the stock market are often overlooked.
It’s true, we do invest money in stocks to gain a good return on capital, but you can gain a good return on capital from many different asset classes, like private business holdings, commercial real estate, farmland, precious metals, etc. Public markets (stocks, bonds, ETF’s, and mutual funds), however, carry unique benefits few other investments can provide.
Here are five often ignored facts about public markets. Let’s talk about why the benefits received from investing in stocks are important to dentists, specialists, and average investors everywhere.
Purchase in Small Quantities
Shares of public securities can be purchased in small quantities, which is ideal for someone with a profession like dentistry. Investing money each month is much more practical than waiting until you have large sums of money to invest in larger projects.
Investing regularly allows an investor to benefit from periods of economic stress (by purchasing stocks at low prices). They also get the benefit of having money invested over a longer period of time, increasing the effect of compound interest. You can build predictable wealth simply by investing money every month over a long period of time.
Public Markets Offer Immediate Liquidity
However, if you invest the $250,000 in rental property, for example, you won’t have that level of liquidity. You’ll have a fixed, monthly income stream from rent, but it might not meet your immediate need for cash. While rental property offers some great benefits, liquidity is not one of them.
Public investments are much more liquid than private investments, and, consequently, there is a cost for this benefit; you have to deal with the up and down movement (volatility) of these investments.
Broad Diversification for Small Amounts of Money
When Built Correctly, The Odds Are Always In Your Favor
Public Markets Take Very Little Time
Conclusion
Public markets are awesome; they provide the promise of high expected returns over the long run, with many other benefits along the way. Rather than just focusing on “returns” offered by the market, try to keep in mind all the attributes that make it an excellent investment option for average, ordinary people like you and me.