I saw an article today on a news site that likened investing in the stock market to horse racing betting. According to the writer, investors have no control over share prices and should therefore avoid investing in the stock market and instead buy rental property. While it certainly is sound advice, isn't this fear-mongering a little extreme? Investing in stocks is like betting? Meaning there's a 70% chance you'll lose your money? This isn't half-true but I'm sure there are lots of people who won't think of ever investing in the stock market after hearing such "scary" lies.
I agree that investors have no control over the share prices because it is dictated by the market conditions. But I don't agree that investing in stocks is like betting on horses. In fairness to the article, stocks have the element of gambling since the stock prices fluctuate. It's like today it is an advantage and tomorrow it is a disadvantage. But there are stocks, particularly the so called blue chips, with stable prices and with consistent growth. Although I don't invest in stocks, I have some stocks granted by our bank for my length of tenure in our office. But I cannot trade those stocks within a 5-year holding period.
I think it's a well known fact that investors are easily persuaded to invest or not by certain articles, even rumours that are spread and it's wise for anybody not to believe everything they read or hear, and take it as truth. It's important to take on board the advice, but at the same time it still needs to be down to their own judgement to decide or not on any investment and a lot of the time it's worthwhile to go against the trends.
Proper investing in stocks, bonds, and other "paper" is nowhere near as opaque or random as betting on horses. And any investment carries risk. Rental properties carry many risks stocks and bonds do not - liquidity risk; vacancy risk; and the servicing of any debt on the properties, plus property taxes, insurance, maintenance, and repairs. There's also the risk of tenants defaulting and having to evict. Not to mention liability from any possible injuries on the properties, etc. Not saying that rental properties are a bad idea - they can be very good for the right person. But they are not for everyone. And it's generally better to diversify - real estate markets themselves can be very volatile. It's just not as obvious, because you don't get a statement in the mail every month showing how the values of your properties have fluctuated, and you don't have them trading publicly on an exchange throughout the day every business day. If you bought rental properties and had them appraised every year or month, you'd see fluctuations in values similar to your stock portfolio. If you were somehow able to list your properties on a publicly traded exchange, you'd see the prices fluctuate from day to day and even from tick to tick throughout the day. I wouldn't be shocked if that author has little or no investment experience. It would not even surprise me in the least if he has no money to invest in the first place. These are the worst people to listen to.
People are always afraid of things they don't understand. I know that when I was really young I always thought that the stock market was for millionnaires only. Good thing my mother corrected me a long time ago and even pushed me towards investing a little. Happily investing and still sleeping so very well at night.
I sometimes like "lies" that spook the market. Oftentimes digging into the rubble turns up some interesting buying opportunities.
My father refuses to invest in the stock market because he says that you can only be successful if you have inside information. I showed him my small portfolio, but he wasn't impressed by my modest gains. He thinks that if you are in the stock market, you either are the best trader or you'll lose all your money. In my country, a lot of people are afraid of investing, mainly because there were a couple of scams/bankruptcies of some investments banks and a lot of people lost all their money. The thing is, at that moment, those banks were offering 120-150% annual returns! A lot of people made good money, but most of them lost all their money when the bubble burst.
Too many people are greedy and go after the big gains. Then they cry and complain the system isn't fair or it's rigged. Slow and steady boys slow and steady.
Yeah, you've got to think longterm, diversify, do your homework, and not get greedy. The most common reasons people fail include impatience/thinking too short term, excessive fear or ego, being overly concentrated, listening to the wrong people, looking for "tips", and being scammed - either because they didn't know better, or because of their own unrealistic expectations and greed caused them to sink their money into something too good to be true when they actually DID know better. If nothing else, investment in a S&P 500 index fund will build wealth over the long term.
Well, I would think that stocks and bonds are a bit more predictable than horses. I mean certain bonds and so forth speaking broadly have a great stability to them. I think that taking the time to really investigate the options and not acting on a tip or a hunch would be a smart thing to do. I just think as JR EWing said people sometimes have unrealistic expectations when they buy stock and are disappointed when the earnings don't manifest themselves.
