23 Reasons Why You Should Invest in Stocks
Despite the economy's ups and downs, the stock market has consistently proven to be a good place to invest your disposable cash and save for your future (as long as you can withstand the bumps and plan for the long term). The popularity of online brokerages can attest to the demand for access to stocks in a do-it-yourself society.
But some of us may need a little push before taking the plunge, since the stock market can be risky if you don’t know what you’re doing. Whether you want to take on DIY investing or lean on a financial advisor, CreditDonkey is laying out the reasons why you should consider investing in stocks.
The fact is your savings won’t do much of anything if you leave it in a very low-interest bearing account. Not dabbling in the market in some capacity would make any lofty goal of ever owning a house, gifting an education to your own children, or saving for retirement hard if not impossible, unless you are rich already.
- You want to buy a house
- You want to save for retirement
- You want to save for your children's college education
You don’t have to suddenly become a CNBC addict or an expert on certain companies to invest in the stock market. If you have a 401(k) or you’ve had a 529 plan, you have taken part in America’s proven way for getting the best potential for long-term growth from your hard-earned cash.
- Best Potential for Growth: Yes, the market has had its downs (especially in recent memory), but over time, you are poised to get more back from your investment in stocks than you would with corporate bonds, commodities, or treasury notes. From a historic standpoint, stocks have provided nearly 10% over the long term, but U.S. Treasurys have given back just around 5%.
- Asset Allocation: Why bother messing with an investment that can be volatile? The key is to control the volatility as much as you can. This means diversifying where you put your money. You may still want to have some bond holdings and some less risky options, including a money market account, but you don’t want to put all your money in any one spot.
- Advantage of Time: The key to all this is “long term.” If you’re nearing retirement age, you need to pull back on the riskier investment options. But if you have time on your side, you can likely withstand the riskier investments and ride the ups and downs that are going to happen. The hard truth of investing is that you can’t get big returns without big risks.
Need more than the premise of history being on your side for investing in the stock market? Read on for our 23 reasons to take a leap into the stock market.
1. IT'S NOT 2006
Yes, we know the market crashed in 2007, but had you invested all your hard-earned money in 2006, you'd be singing the blues a year later. Times have changed, the economy is on an upswing, and "Borat" is just a movie from the past.
2. IT'S NOT 2009 ANYMORE, EITHER
|2009 becomes 2010: Happy New Year! © Optical illusion (CC BY 2.0) via Flickr|
After the Dow hit a 12-year low in March of 2009, stocks began to rebound. While the market was by no means "healthy" at this time, great bargains could be had. If you held stocks for just a couple of years, you would definitely find yourself making some money. Just ask Mitch Tuchman, a retirement expert who reported in Forbes that 2013 was a standout year for stocks.
3. YOU'RE EARNING A WHOPPING .05% INTEREST ON YOUR SAVINGS
|Analyzing Financial Data © Dave Dugdale (CC BY-SA 2.0) via Flickr|
This is just unacceptable. At this rate, if you had $10,000 in your savings account for a year, you'd end up with $5 in earned interest. That will barely buy you a Frappuccino at Starbucks. Time to look into investing in the market, even if you're only placing safe bets.
4. FRANKLY, IT'S A GOOD LONG-TERM INVESTMENT
|Stock Market Crisis Over © Wagner T. Cassimiro "Aranha" (CC BY 2.0) via Flickr|
Yes, the stock market can be risky, but if you're not looking for a get-rich-quick scheme and instead invest wisely over time, you will see your money grow in leaps and bounds. Even after a bear market, stocks will become bullish again. Be patient.
5. YOU WANT TO FEEL LIKE AN ADULT
|Business Baby Pointing © Paul Inkles (CC BY 2.0) via Flickr|
Casually mentioning at a dinner party that you own stock in Apple sounds impressive, doesn't it? Realize, though, you'll need to cough up a whole lot of cash just to buy one share, so you might want to consider investing in a good company that is a little more attainable.
6. YOUR FRIEND'S STARTUP IS FINALLY GOING PUBLIC
AND HIS NAME IS MARK ZUCKERBERG
OK, if your friend really was Mark Zuckerberg, you'd probably already have millions by now, we would hope (well, at least if he let you in on his little venture ahead of time). But if you do happen to have a friend who has a real solid idea that could go places, pay attention and follow the process. The more you are exposed to stock talk and news about IPOs (initial public offerings), the smarter you’ll be when it’s time to lay your money down. Just be careful not to base everything on what your friends do. Even Facebook stock didn't perform as well as predicted when it first went public.
7. GOOD, SOLID INVESTMENTS CAN REALLY PAY OFF
IF YOU'RE SMART, AND OF COURSE YOU ARE
You don't have to be a dedicated day trader to make money in the stock market. Who has the time for that? If you study the stocks you want to place your money in and watch their overall growth over a period of time, you're more likely to make a wise decision by purchasing them. Buy low, sell high. And if you’re still not feeling confident — or you want to be more conservative — stick to stock index funds to avoid having to pick any one stock.
8. YOU WANT YOUR MONEY TO GROW
|Growing your Investments © Images Money (CC BY 2.0) via Flickr|
If it was only as simple as planting your money in a pot and watering it, we'd all be wealthy, right? Well, since not everyone has a green thumb, consider investing your money in stocks instead. It’s the only real potential these days to see significant growth in your investments.
9. YOUR UNDERWEAR DRAWER IS OVERFLOWING WITH CASH
We know, hidden under your silk bloomers is a stash of hundred dollar bills that you've been saving for a rainy day. Well, consider it pouring outside. That cash is doing nothing for you just sitting around. If you place some of that cash into stocks, you'll likely wind up with more than crumpled bills.
10. YOU WANT TO IMPRESS YOUR PARENTS
They always knew you'd make them proud someday with your adept skills, but how about making them really proud by letting them know you've opened an online brokerage account and made some wise investment choices? You've come a long way from Jenga, baby.
11. POTENTIAL TAX SHELTERS WITHOUT BREAKING THE LAW
IF YOU OPEN A STOCK, BOND, OR MUTUAL FUND IRA, YOU'LL BE GETTING TAX SHELTERS WITHOUT BREAKING THE LAW
Yes, you can open an IRA and either be able to write it off on your income tax (with a Traditional IRA) or open a Roth IRA and eventually take the money out tax-free. Yes, you heard that right, tax-free. So, if you invest $5,500 (the current annual limit) in an IRA each year while you're young, you stand to have over a million bucks by the time you hit 65.
12. YOU WANT TO BE SAY, "HEY LOOK, MY STOCK WENT UP TODAY!"
|Morgan Stanley ticker, Times Square © huangjiahui (CC BY-SA 2.0) via Flickr|
Even if you say your stock went down, you will still look cool to your friends if you can just look at the abbreviation on the ticker and say, "Hey, there's one of my stocks!" But don't sell the stock just because it went down — it's important to remain patient in the market. There will always be highs and lows.
13. YOU SAW THE WOLF OF WALL STREET
AND KNOW YOU’RE SMARTER AND HANDSOMER THAN LEONARDO DICAPRIO
Chances are you’re not better looking. And neither are we. But if you're as smart as you think you are, you'd know that DiCaprio wasn't the actual “Wolf of Wall Street.” Jordan Belfort was, and he's the one who let his penny stock success go to his head and ruin his life. If you were paying attention between bites of popcorn and Junior Mints, you'd also know that pink sheets (or over-the-counter stock) are extremely volatile, but you can make money if you do your research and don't buy a Ferrari and a mansion the second you make a buck.
14. WARREN BUFFET GOT RICH ON THE STOCK MARKET
Because he made wise choices, not because he's a risk-taker. The Wall Street Journal offers five investing tips from Mr. Buffett that might eventually allow you, too, a brief stint on Floyd Mayweather's "The Money Team."
15. YOU JUST GOT A JOB AT A GREAT COMPANY
BUT IT DOESN'T OFFER A 401(k) PLAN
|401K © Tax Credits (CC BY 2.0) via Flickr|
Yet you insist it's a great company? You might be getting free snacks and a parking space with your name on it, but nothing beats a matching 401(k) plan. Hopefully this company is paying you well enough that you can invest in your own retirement plan and put your money in some stocks and an IRA.
16. IT'S ALWAYS GOOD TO DIVERSIFY YOUR PORTFOLIO
AND TO SOUND KNOWLEDGABLE ABOUT IT AT A COCKTAIL PARTY
|Monopoly © John Morgan (CC BY 2.0) via Flickr|
If you're holding a martini in your hand, do you want to talk about important matters or Justin Bieber’s latest escapades? When you want to impress, there's nothing like being able to state that you have 50% in stocks, 30% in mutual funds, 20% in bonds and 10% in options and futures. It shows you know what you’re doing by taking a level-headed approach to your investments. Throw in some talk about why Justin Bieber got arrested again, and you’ll be able to impress others with your diverse knowledge of all topics.
17. IT'S WHAT THOSE TALKING BABY COMMERCIALS WERE ABOUT
When you’re past the point of not knowing what “E-Trade” even is (some of us still think it’s a diaper company after all those baby-talking ads), it may be time to opening an account with a brokerage and start investing for your own baby's future.
18. LIKEWISE, YOU NOW KNOW WHO CHARLES SCHWAB IS
|Charles Schwab, Manchester, CT, 7/2014 by Mike Mozart of TheToyChannel and JeepersMedia on YouTube. © Mike Mozart (CC BY 2.0) via Flickr|
Smart investors shop around. They don’t just go with a brokerage like E-Trade because of one commercial that won them over. You search, you shop, you compare, and then you make your move. If you can do that with the brokerages you choose and the stocks you invest in, you’re ahead of the game.
19. YOU WANT TO SAVE FOR YOUR RETIREMENT
EVEN THOUGH IT SEEMS LIKE A LIFETIME AWAY
|Crossroads: Retirement or College Fund © Chris Potter (CC BY 2.0) via Flickr|
The time will be here before you know it, trust us. The earlier you save, the more you will have at the end because of the power of compound interest. You won’t be able to save interest upon interest upon interest if you wait until you’re 55 to begin saving for that ride off onto the sunset.
20. YOU DRIVE A HYBRID AND YOU RECYCLE
AND NOW YOU WANT TO PUT YOUR MONEY WHERE YOUR CAR AND CANS ARE
|Thin Film Solar © Walmart (CC BY 2.0) via Flickr|
Investing in companies that matter to you can be a smart way to purchase stocks — provided those companies have a good track record and a healthy business. For instance, putting your money into a startup that promises to make flying cars is probably not a wise investment at the moment — so perhaps you’re better off sticking to a business that makes hybrids (if such cars fit into your philosophy and from what you can tell, there are a lot of people who agree with you).
21. YOU'RE A RISKTAKER BUT A SMART ONE
|Skydiving_404 © Philip Leara (CC BY 2.0) via Flickr|
Truth is, many people want to invest in stocks to make a killing. While this is certainly a possibility, don't put all your eggs in one basket, and make sure you have a diversified portfolio and disposable cash before trying to play the stock market. This is where you could gain big but lose big as well.
22. MAKING MONEY IS FUN
ESPECIALLY WHEN YOU DON'T HAVE TO WORK FOR IT
Imagine sitting at home in your underwear and collecting dividend checks because you invested wisely. Can't ever see that picture in your mind? Then put on some clothes and try again.
23. YOU WANT SECURITY FOR YOUR FUTURE
|Safe © Rob Pongsajapan (CC BY 2.0) via Flickr|
Planning ahead will rarely let you down. Invest smart, and you can hang out at the senior center without ever having to yell out "Bingo!" and still have a nice nest egg in your golden years.