I had a recent conversation with someone who seems to think investment in anything is a poor idea. I was extremely shocked. But I didn’t want to engage in an argument with him. I just said “Yup” to his entire theories wand went on by my day trying to play the next market move. His excuse is if I have $100 in my pocket its $100 I can use it whenever. But if I invest somewhere I don’t know whether I will get anything back. Amazing theory when you look at it in a simple way. In fact it’s an amazingly stupid theory. This is pretty much why we have a substantial amount of people who barely make anything in their life even after 50 years of working hard and still poor.
The reason why I said his theory of $100 is stupid is this. $100 in his pocket is $100. No difference but in 10 years time this $100 wouldn’t be worth anything. Inflation alone will eat the value of this $100. In fact what you could buy with $100 today you wont be able to buy 10 years from now. It might be worth what $10 is today. But if $100 is invested somewhere INTELLIGENTLY like an ETF of S&P500 with an average return of 8% it will be now be worth $215, 10 years from now. But unfortunately it’s impossible to convince this person who is substantially older than me not to mention the prejudice and arrogance that comes with age. So I never bothered convincing him. It’s just a waste of my time.
I happen to realize that people are wired different. There are people who think investing is good idea and the rest who think investing is stupid. They always come up with crazy stories. Yeah he bought stock market few months before recession and lost a lot of money. Which was again one of his other stupid theories. Well technically those stats are wrong. If you had bought S&P 500 few months before 2008 recession, yes you would have bought the top of the market, yes your value of investment of say $100,000 would have gone down to around $50,000 range by 2009. But today after 10 years that investment of $100,000 is worth around close $200,000 range. Now who is stupid, the person who still has that $100,000 or the person who has doubled is account in 10 years and most likely quadruple his account in 20 years. He will be having close to $500,000 or more by 25 years or so while this “amazing theory dude” will have $100,000 in his bank account.
“Isn’t the stock market risky”? “Wouldn’t there be a crash?” These are all good questions but eventually regardless the market simply just goes up and up even though there will be years of recession and depression and world wars. Even with all that you would get a pretty decent return over a larger time frame. By larger time frame I mean 10 years plus. If you don’t believe me just Google your country specific index whether it’s the S&P 500(US), Dax(Germany), FTSE(UK) or Nifty(India) and look at the monthly charts.
However this is not true for single company stock. I am talking about stock market index as a whole. Investing in an index is like investing the largest group of companies of that specific country. Thus the risk becomes much less as compared to buying a single company.
What products to invest and where to invest safely is discussed in this article in link given below.