DEMYSTIFYING THE MISUNDERSTANDING

Do you fear the stock market or investing because of risk? Do you think the stock market it’s a gamble for smart people? Though many say this, the fact is that big investors, banks, hedge funds and many other financial institutions heavily invest on the stock market. Their profits keep on increasing and so do their lifestyle. You may have heard sometime in the news… In this article we will learn how to have extra cash next year for whatever needs or things you may want to pay or buy.

Let’s start by understanding why everybody has to invest in the first place. At some point in your life you may want to retire with a big account, with all the comfort required for when you no longer can work. Increasing one’s level of wealth also means better providing for one’s family or to have more fun with friends and beloved ones. Not to mention paying off one’s debt or driving a better car. It’s in your interest start investing as soon as possible.

BEHIND THE QUESTIONS

Often times we all have this dilemma in our brains – do I keep on saving or do I spend this money I have on this other thing you may want, desire, fancy or simply… I can’t wait to have -. Well… there’s a couple of things you may want to think about this.

If I do not save, I can’t really buy much of anything unless I earn enough. If I buy something that I do not need, this very thing, will impede me saving for a better outcome which should be to keep on increasing one’s wealth. Consumerism and keeping up with the Jonases it is some times difficult.

Advertising in all media will make your brain wanting more and more things by pushing clever designed jingles and promises that rarely will have into account your real needs, and the peer pressure in a life riddle with social conventions and expectations where the different or the unconventional is pushed out of the group will make you try your hardest to fit with everybody around you by purchasing, arguably, unnecessary items and products hurting your purchasing power.

CUT TO THE NUMBERS

All comes down to your financial goals, and these, should be; wanting a better life now and

in the future. So where do we start? Determining one’s financial goals indeed.

So… what sort of a lifestyle do I want for me and for my family? It all will depend on how comfortable you want to live your life. Maybe it is five hundred more dollars at the end of the month, or, perhaps it is eight thousand. Maybe you want a new car sometime next year or even to have more money in your 401k.

About 10 % percent it’s the average return on the S&P 500. This is an Index fund that tracks the 500 largest companies stock market in the USA. It’s the most recommended type of investment for people that just wants to passively invest in and outside their 401k retirement plans. This type of investment it’s also suitable for investing the long term, because, it’s should be passive in order to even out the ups and downs of the stock market when averaging all the years you are investing on it.

To understand this I will put a simple example:

In 2019 the return on the S&P 500 was: 28.88%

In 2020 the return on the S&P 500 was: 16.26%

In 2021 the return on the S&P 500 was: 26.89%

In 2022 the return on the S&P 500 was: -19.44%

In 2023 the return on the S&P 500 was: 24.23%

And other years like 2018 was -6.24, or, 2008 was -38.49%. Some years it will be more like just 3.00% like in 2005. As you can see, some good years will make up for those bad years. It’s difficult to predict the stock market ups and downs and one has to be diligent when deciding when and how to invest.

Typically, if you are considering investing in the S&P 500 outside the your 401k retirement plan, you can do so opening a brokerage account in or . These brokerage accounts charge very low commission fee percentages and allow you to invest broadly in the stock market. They also offer and with the possibility of .

If you have got to invest lets say $10.000 you will receive $1.000 annually, discounting taxes and fees. The key point is that is a passive investment.

IF I HAD A PENNY…

I once had a friend that told me: There’s no such thing as easy money.

My friend was wrong. It’s a long term investing strategy that most people should stick to if they don’t have the resources or time to research on individual stocks and companies. It’s easy and simple: there’s not many ways of going wrong with this strategy. Mind you, there’s more strategies for more sophisticated investors with different returns or for different purposes but this an easy and recommended strategy by many professionals, including no other than the most rich investor of all times, Warren buffet and Charlie Munger (R.I.P) also by Peter Lynch and many other renowned investors.

The principle of this strategy is it’s simplicity and effectiveness. Overtime, can earn you substantial returns provided you let it grow in the markets.

THE BOTTOM LINE

Investing should not be a rocket science and in fact it is not. It takes a bit of patience in certain scenarios like this and a bit of discipline. The volatility of the stock market can make you lose money. Remember that every investment decision is risky. For proper investing advice consult with a CPA, Money manager or advisor in good standing with fiduciary responsibility that has your interest first before his.

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