Monday, October 12, 2020

Why Should I Invest in the Stock Market?

Many people before they begin to invest in the stock market ask themselves why they should do such a risky thing as buying stocks in companies.


I asked myself this very question over forty years ago.


My answer to myself back then was to make some money.


How did I start, I read lots of books. Books like "The Little Book of Stock Market Investing"


Did I make money?  Yes. I have made a good amount of money. In the last ten years over $250,000. I have lost a good bit of money too. The crash of March 2020 saw my investments lose almost $70,000 on the worst day. But some investments made then, such as a purchase of MGM has made a return of over 100% in weeks.


I have had some successes over the long term too. I began buying Apple (AAPL) stock in 2008. Shortly after I came to live in the United States. Back then I paid less than $100 for a share. I traded the stock a little, back then there were trading fees too which ate into my profits, up to $20 per trade, ouch! I never had more than ten shares back then.  My average cost per share coming into the August 2020 stock split was $just over $80 per share. Following the stock split at four for one shares my average cost is now $19 per share.


Time in the market helped me generate those returns. I now after about a decade of owning Apple stock, have a cost per share of $19. A stock that trades in the last month at a low of over $105.


 Can you make lots of money quickly?  Yes.  But to make lots of money quickly you need events of the magnitude created by the pandemic. In my forty odd years these came along just four times. Once a decade on average you may think, but three of these events have happened in the last twenty years. The first just over thirteen years before the year 2000 and was mostly a localised crash in the United Kingdom.


At that time I panicked and sold out of the market at the bottom. Losing a decade of work investing and then having to start again in the 1990's.

It pays to stay in the market when stock markets fall. O.K. add to some of your best stocks in times of trouble as long as the stocks you buy are strong companies.  I recently sold out of my energy stocks. Because? Well although the markets took a tumble and the energy sector fell with the market. The energy sector looks to have more problems than just the pandemic. I still own an energy ETF but no major oil companies as single company stocks.

You always need to look out at what is happening to your investments. Constantly look to modify your strategy. I personally like dividend paying stocks. They pay me an income of $200 to $500 per month, it varies on a monthly basis the best months being March, June, September and December. My worst month January. But I also like to speculate a little, buying the occassional non dividend stock, an Amazon, or Paypal and even Pinterest. They add a little spice to my portfolio, along with my McKormick.

So why should you invest in the stock market? If you want to make money, create an income stream away from a forty hour work week. Are prepared to lose somedays, you will win on most days, the market rises on an average of two out of three days over the long term. Though in a long run of losing days it is hard to remember an up day.

Be prepared for the long run. Invest in low cost funds if you don't feel confident. Invest in your local market or globally as you feel. Look to the long term.  Over the years to come, you will get older, you will learn, you will make mistakes, you will have bad days, you will have great days. You will be a successful investor.

The laws of mathematics show, you can win at stock market investing.

All the best at your investment journey.

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