Top 3 Reasons Why You Should Be Investing Right Now
The stock market is down a good amount in 2016. The first month, which just ended was terrible. The Dow Jones Industrial tumbled 5.5%, while the Nasdaq went down nearly 8%. This could be a bad omen for 2016, but it’s not the end of the world. While some stick to their guns (literally) and funnel their money into bonds, gold, and other junk, I look for bargains. In fact, when the market is down, I buy more stocks! There are bargains to be had and my Betterment account was getting filled over this past month. I don’t know what will happen to the market this year, but you should always buy low and sell high. That’s how you grow your wealth and win at investing. Don’t let emotions play you for a fool. Keep funding your investment accounts and ride through this presumably bumpy year.
Here is a post from my good friend John, from Frugal Rules and Best Discount Brokerages. Hear him out. He used to work in the investment sector!
It’s pretty common knowledge that investing in your 401(k), IRA, and private investment account should be a fundamental part of your financial and retirement planning. In fact, the personal finance industry encourages you to start as young as possible, and for a good reason – generally speaking, the longer you are in the market, the larger your eventual gains.
But still, some Americans brush off this advice, particularly Millennials. Many reports suggest the Millennial generation is skeptical of Wall Street, and rightfully so. This is the generation that saw the Dow Jones fall from around 14,000 to a low of nearly 7,000 in 18 months. An event like that can scar you, much the same way the Depression scarred the people born into it.
Nevertheless, as these young adults get married and start families, money starts to become a more important issue. Here are three reasons you should set aside your negative feelings about the stock market and start investing to secure your family’s financial future.
You’re Betting on America
This isn’t some line to conjure up your nationalistic pride. If you think the United States’ economy will continue to grow 10, 20 or 30 years from now, then invest in the U.S. markets now.
While most people can’t guess exactly where the market will be decades from now, you can hypothesize that, at some point in the future, it will likely be higher. I can say this with a fair amount of certainty because, imagine for a moment how wealthy individuals, Wall Street, banks, hedge funds, investment companies and private equity groups will make money if the economy and stock markets stand still or decrease in value? There is a lot of money at stake, and a sinking economy is in nobody’s interest.
Otherwise, if you believe America is in a long-term, downward cycle, you probably shouldn’t be living, working, or investing here in the first place, right?
Bottom line, if the world’s economy collapses, your cash will be useless anyway. Until then, choose a discount broker, open an account, and start investing.
If You’re Not Putting Your Money to Work, You’re Getting Left Behind
There are two factors here – inflation and relative wealth.
While the official line of the government and Federal Reserve is that there has been very little, if any, inflation the last several years, anybody who isn’t in the top 1% knows prices have increased across the board. So if you’re earning .01% in your checking account or .05% in your savings account, your cash is losing value as the cost of living increases.
Secondly, if your peers are earnings returns through their 401(k) or private investment accounts, then relatively speaking, they are growing their wealth while yours remains stagnant. For instance, between 2010 and 2014, the S&P 500 earned a total return of 105%, meaning someone would have doubled their money investing in the index during that period.
While we’re not encouraging jealousy or competition, it is important to take advantage of opportunities when presented because they allow you to increase your capital base for other investments, such as real estate. Withdrawing a portion of your investment gains or borrowing from your 401K to purchase rental property or start a business is easier when the cash was essentially “free money” you didn’t have to slave away earning from a job.
Make Investing a Priority and See Other Aspects of Your Finances Improve
Thinking like an investor can give you a new perspective. Instead of thinking like a consumer and viewing money as a means to buy products/services, you start to see money as a tool and the potential gains you can earn.
For example, when I see $1,000, I think of it as capital for an investment, and what it can be 30 years from now. If you just invest in a risk-free 30 Year Treasury yielding approximately 3%, that thousand dollars becomes more than $2,400 and that’s only a small amount with a conservatively low return. With 5%, the figure becomes $4,300 plus and with the average market return over the last 100 years of roughly 9%, you get $13,267.
When you start seeing the potential future value of your money, it makes it harder to throw it away on expensive cars you can barely afford or gadgets you use once a month.
Investing is like a marathon. As the famous quote goes, it’s all about “Time in the market, not timing the market.” You have to invest and be in the game to even have the chance of earning a return, so start investing now to avoid kicking yourself years later when share prices inevitably increase.
Author Bio: Gary Dek and John Schmoll, two former investment professionals, are the founders of Best Discount Brokerages, a website dedicated to reviewing and recommending the best discount brokers online.