A comment yesterday got me thinking, why exactly am I investing in the stock market? I just had to ask myself, why wouldn't I invest in the stock market? I've been studying and trying to find the best form of investment for my money, which I have saved so far and the stock market to me, is the obvious answer.
*Image source: Flickr.com - Rafael Matsunaga*
## What makes the stock market a good option for me?
First of all, the stock market is very stable, contrary to what people think. There are individual stocks that fail, there are individual stocks that flourish. There are times the stock market seems to collapse, but it always returns after that. The average of the stock market, however, keeps on growing and growing. It has for more than a hundred years.
The stock market provides good returns. This might seem like a very low number in the cryptocurrency world, but 8% interest per year is good for the risk it consists of (very minimal in the long term). Most people can achieve this with a little investigating, or just investing in non-active index funds. Warren Buffett for example keeps on insisting that the average investor should just invest in index funds. This is mostly, because it is so simple and you don't need to be interested in investing. For those interested, we can take our chances and try to find a bit better outcomes through investing in individual stocks.
The next point, it is interesting. The stock market offers a wide range of different opportunities, it makes you understand how the financial world works. It gives you the opportunity to test your understanding of how other people think. This of course can backfire. And it is probably my flaw in investing. I want to be active to some degree, even though I hold all my stocks, I don't want to sell them, ideally ever before I need the money.
The stock market also offers an easy entrance to investing. You can start investing with a few dollars worth if you wish. It also doesn't make you loose everything if you make wrong decisions in the beginning. It will slap you in the face, but you'll be fine. At worst, you'll loose tens of percent of your investment, but a company dieing in the stock market is very rare, that is due to the regulations that they need to fulfill before they even get to be in the stock market.
When investing in the stock market you have a way of knowing what you invest in. There is actually something behind the investment. You are buying a part of the business. The fact alone makes me happy. I'm actually owning a part of that big corporation! Some laugh at the idea, but it is true. Actually, when you invest in the stock market, the best trick psychologically is to think of your stock purchase as buying a part of the company. That will make you think, why do you want to own this company? I remember someone said, can't remember who: "When you are woken up in the night and asked, which company would you like to own? The best stock to own is probably that one.". I think the quote captures the essence of any stock market investment. Buy the company that you want to own. What do you want to own? When you know, buy that stock. But don't make the decision based on emotion, try to think of it like you were buying the whole company with all it's employees, would you trust them to work for you? That is why I trust the stock market, I can actually understand why some stock should perform in the long run, versus the forex market for example. There is no way of knowing why the Euro is stronger than the Dollar this week, it is all speculation.
*Image source: Flickr.com - Tax Credits*
## Stock vs. real-estate market
In comparison to what I might personally prefer as an secure investment choice the real estate market, for the stock market you don't need a lot of money, you can get out when you want to, you'll get better returns, unless you use leverage in the form of a loan, in which case you might do better in real-estate. But in real-estate you need to work to some degree. You'll need to manage your billings and your different real-estate, the work is of course minimal. In the stock market, you can just forget about your investments for months if you wish. In the real-estate market, if you rent your real-estate, you'll get a monthly income, but the growth of your wealth, won't automatically start growing compound interest, you'll need to find another place to put it. In the stock market, you have dividends, but most companies pay dividends once a year, and you can just stick 'em back where they came from. Well, enough for a comparison of the real-estate vs. stock market, I like both, I'll probably invest in both eventually, but for now, I can't afford real-estate. In a few years probably.
*Image source: gofishdigital.com*
## Stock vs. cryptocurrency market
The cryptocurrency market offers a great opportunity to make a lot of wealth. It probably will make many people a lot of money, including me. The problem with this market, however, is that it is speculative in nature. The technology is awesome, it will make it. But we only need the development of the technology. Those who turn it into a business will eventually make it big time in the stock market, not the cryptocurrency market. For now the value of the cryptocurreny market is low, it means that there is a lot of time to grow. The problem is, only a handful of cryptocurrencies make it in the long run and there are thousands. If you pick right, you'll make a lot of money. If you pick wrong, you might loose everything in a month. The volatility is insane.
I, however, believe that there are ways to find the right cryptocurrency, but I don't think anyone can say at this point what the correct ways of investing in cryptocurrency are. There are ways that seem to work. I've succeeded in my long term investments in cryptocurrency, but the truth is, the fun might stop some day, we really can't say. At very least this increase will stop eventually. Now is the best time to be in. However, I personally don't trust my savings in cryptocurrency. I have my ideas of how it works and I share them, but I hope no one decides to invest based on them, because they are only my thoughts on the matter.
Educated guesses are the best anyone can offer in this new and wild ride. Whereas the stock market, has a proven track record.
## Should you invest in the stock market?
I honestly can't say, nor am I allowed to because of the law :) However, what I can say is that the stock market in my opinion offers a good and trustworthy investment place for those who understand that it is tied to the whole system. Businesses run the economy, the stock market is investing in the businesses. If the stock market fails, the economy fails. You'll be hunting animals again after that, because there won't be shops around where you can buy your food. Sounds extreme? Well that is my thinking of why I trust the stock market. I'm also optimistic that it won't stop growing now.