New York, New York (PRWEB) November 1, 2005 — Despite what conventional wisdom tells you, investing is not like horse racing. It’s not simply a matter of finding the fastest horse out there and betting all your money on it.
Instead, making good investment decisions requires you to think long and hard about what you really want to get out of investing, and then choosing the investments that will actually help you reach those goals. Depending on your situation, those investments may or may not include stocks.
The reasons to invest in stocks–or any other type of investment–are as varied as investors themselves. When we asked members of the Armchair Millionaire community recently about why they invest in the stock market, we heard a broad range of reasons. Here are just two:
“I choose the stock market because I think it’s the best way to invest for the long run, at least for me. I don’t expect the big returns of the 1990’s, but they should still be decent going forward.” –mysticaltyger
“Plain and simple, I invest in the stock market to make more money that I would make in a simple savings account. Various ways to go about investing, but in the end it’s all just ‘Vegas Without the Lights!’” –kirkisms
As you make your investing decisions, don’t be misled by clichés that insist that stocks are simply the “best” investments out there. You’ll need to dig deeper to learn whether stocks are genuinely right for you. My guide sets right some of the most common fallacies about investing in stocks.
The Armchair Millionaire’s Guide to All the Wrong Reasons to Invest in the Stock Market:
I invest in stocks to get rich. Simply investing in stocks won’t make you rich. However, you can grow your wealth over time by investing on a regular basis, re-investing your returns to capture the benefit of compounding, and choosing low-cost, common sense investments. For many people, these investments are found in the stock market.
I invest in stocks to make my money grow as much as possible. It is true that, over time, the stock market as a whole has produced returns that are superior to bonds, CDs or money market funds. However, that’s still not the most compelling reason to invest in the stock market. Instead, the real benefit of stock market investments is that they give you an excellent hedge against inflation. So while inflation will eat away at your portfolio at the rate of 3 percent or so a year, stocks will outpace inflation to provide you with a positive net return over time.
I invest in stocks because the stock market is now open to everyone. Mutual funds and inexpensive online trading have made the stock market accessible to almost everyone, but it is still not necessarily right for everyone. Investing in stocks carries substantial risks, which you should understand and be able to manage. For many people, these risks mean that they should not put all or even most of their savings into the market. Other types of investments may be far more suitable for helping them to attain their financial goals.
I invest in stocks because I like the thrill of gambling. Shares of stocks rise and fall–sometimes dramatically–but that does not mean that investing in stocks is gambling. There are no guarantees in gambling, but stock investing does give you one guarantee: By buying shares of a company’s stock, you will get a share of that company’s future earnings and growth. So on a very small scale, when you invest in the stock market, you get in on the growth of capital markets. And there is one thing that has been proven over time: Capital markets work.
THE BOTTOM LINE: Investing in stocks is already uncertain enough–don’t compound it by betting on things over which you have no control. Instead, focus on what is sure and dependable in the stock market.
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About the Founder:
Lewis Schiff founded the Armchair Millionaire Web site in 1997. His first book, The Armchair Millionaire, was published in 2001. Schiff’s newest report, “How to Know When You Are Rich,” is now available at www.armchairmillionaire.com.