I recently made a flippant comment on Twitter about how investing is easy. At the time my investment accounts were up over 15% year to date and my dividend returns had never been better … of course this had everything to do with the bull market we’re in and absolutely nothing to do with my investing prowess.
Someone tweeted back at me that my comment made it sound as if investing were foolproof, which of course it’s not.
Investing can be scary. Investing will challenge your fortitude and will make you second guess yourself. But at the end of the day, I stand by my comment: investing is easy.
Investing Is Easy
While there are a number of things one can invest in, I prefer to own stocks, so that’s what I’m writing about today.
This isn’t a how-to post and you won’t find a step-by-step guide to investing here, so you’ll just have to trust me when I say that you can open up a brokerage account and begin buying stock within a matter of minutes. For just a few bucks you can buy and own stock. You can even invest your spare change!
Investing in stock is both fast and easy, but most importantly, investing is required to reach financial independence and early retirement. To understand why, check out this chart that shows two different paths $100 can take over the next 10 years if you decide to hold it vs. invest it in stock.
Not investing is scary
Those arrows are trending in completely opposite directions because while investments grow in value over time, cash loses value. In fact, thanks to inflation, the price of stuff doubles roughly every 20 years.
So if your financial plan is to acquire as much cash as possible, then you might want to rethink that plan. While it might work for you, it won’t work for most because today’s cash just won’t go very far in tomorrow’s world – scary!
To truly get ahead financially we need to let our money go to work for us, and investing is how we can turn cash into an army of workers that are ready, willing, and able to go to work for us 24 hours per day, 365 days per year.
You shouldn’t be investing money that you’ll need access to within the next five years, but if you’re in it for the long haul, then the daily ups and downs of the stock market shouldn’t bother you and you’ll come out just fine in the end.
That’s because, over time, the stock market always goes up. Sure there are lots of ups and downs along the way, but the march upwards is unmistakable as you can see in this chart that shows the growth of the US stock market since it’s inception.
The Simple Path to Wealth
I could go on and on about why investing is easy, smart, and required, but I’d just be repeating the words of Jim Collins. His blog and book completely changed my own view on investing. You should read the Stock Series on his blog, JL Colins NH.
If you’d like to read the edited, concise version of his blog then you can read his book The Simple Path to Wealth. It might be at your local library but if it’s not, you could invest $15 bucks in yourself and buy it on Amazon.
Investing is easy, but not foolproof and certainly not guaranteed. HOWEVER, if you’re willing to stick with your stocks through all the ups (don’t get greedy and sell) and downs (you only lose money if you sell when your down), then this investing thing ain’t too hard after all.
Do you invest? In what? How hard/scary was it for you to buy your first stock?