For most of the last century, investing in the stock market has been a great way to make money. That?s because share prices have mostly gone up. Of course, someone who lost their retirement savings during the recession doesn?t want to hear that. While the markets have mostly recovered since the economic crisis, many people still want nothing to do with equities.
These days, most people are keeping their money in bonds, high-interest savings accounts or under their mattress, which is precisely where you don?t want your cash to be. Investments must grow faster than inflation or you end up losing money. Right now, inflation is around 2 per cent, while a 10-year Government of Canada bond is paying 1.8 per cent. You get nothing for storing your money on a shelf at home.
Despite what you saw in the crisis, the stock market isn?t a scary place. There are plenty of low-risk places for conservative investors to stash some dough, such as in brand name, dividend-paying stocks. While it?s true that equities will always be riskier than bonds, in today?s low-interest rate environment, barely paying fixed-income has become risky too.
The beauty of the stock market is that anyone can buy in, even if you only have $20 a month to save. Banks will take just about anyone at any income level; some larger firms require a $500,000 investment or more before they?ll take a client on. While you can get access to different investment options ? such as real estate or hedge funds ? if you have more money, the point is that you don?t need to be rich to invest.
You also don?t need to know much about the markets. Investing newbies can purchase mutual funds ? securities that hold a basket of stocks ? through an adviser. Savvier investors may buy stocks online. The earlier you start the better, though. The longer your funds are left to grow the more money you?ll make.
The only people who should stay away from the markets are those who can?t stomach any risk at all. Even the most conservative equity investor will see their portfolios fall from time to time. If you can?t fathom seeing a negative number, then maybe the mattress is right for you.
As history has proven time and time again, though, markets do rise. It may take a while before the volatility we?re experiencing today dies down, but it will. Either get in now, when stocks are cheap, or hope that wad of cash you?re hoarding somehow finds a way to reproduce.
For most of the last century, investing in the stock market has been a great way to make money. That?s because share prices have mostly gone up. Of course, someone who lost their retirement savings during the recession doesn?t want to hear that. While the markets have mostly recovered since the economic crisis, many people still want nothing to do with equities.
These days, most people are keeping their money in bonds, high-interest savings accounts or under their mattress, which is precisely where you don?t want your cash to be. Investments must grow faster than inflation or you end up losing money. Right now, inflation is around 2 per cent, while a 10-year Government of Canada bond is paying 1.8 per cent. You get nothing for storing your money on a shelf at home.
Despite what you saw in the crisis, the stock market isn?t a scary place. There are plenty of low-risk places for conservative investors to stash some dough, such as in brand name, dividend-paying stocks. While it?s true that equities will always be riskier than bonds, in today?s low-interest rate environment, barely paying fixed-income has become risky too.
The beauty of the stock market is that anyone can buy in, even if you only have $20 a month to save. Banks will take just about anyone at any income level; some larger firms require a $500,000 investment or more before they?ll take a client on. While you can get access to different investment options ? such as real estate or hedge funds ? if you have more money, the point is that you don?t need to be rich to invest.
You also don?t need to know much about the markets. Investing newbies can purchase mutual funds ? securities that hold a basket of stocks ? through an adviser. Savvier investors may buy stocks online. The earlier you start the better, though. The longer your funds are left to grow the more money you?ll make.
The only people who should stay away from the markets are those who can?t stomach any risk at all. Even the most conservative equity investor will see their portfolios fall from time to time. If you can?t fathom seeing a negative number, then maybe the mattress is right for you.
As history has proven time and time again, though, markets do rise. It may take a while before the volatility we?re experiencing today dies down, but it will. Either get in now, when stocks are cheap, or hope that wad of cash you?re hoarding somehow finds a way to reproduce.
Follow the advice of these famous investors and watch your returns rise:
Warren Buffet
The Oracle of Omaha got rich by buying underappreciated companies. It?s called value investing. You buy a business that no one wants, which makes it cheap. When people eventually buy in the stock price soars.
Peter Lynch
This famous investor perfected the Growth at a Reasonable Price approach. He wants undervalued companies that are also growing earnings. Find a value stock that?s growing and you?ve got yourself a winner.
Prem Watsa
The CEO of Toronto?s Farifax Financial has been called the Canadian Warren Buffet. He?s also made his million buying undervalued companies. Like any good investor, he?s focused on long-term returns, not short-term gains.
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Bryan Borzykowski is a Toronto-based financialwriter and the author of Building Wealth All-in-One for Canadians for Dummies. Contact him at bryanborzykowski.com or follow him on Twitter @bborzyko.
Source: http://metronews.ca/news/canada/430932/investing-why-stock-rookies-shouldnt-fear-stock/
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