Let’s admit it: From an outsider’s perspective, the stock market can look a little intimidating.
Before the internet, most people who weren’t investment professionals encountered the stock exchange as a long, fine-print list of securities that took up two whole pages of their daily newspapers. That mass of scant financial information was enough to discourage many from looking more deeply into the prospect of trading stock.
The internet has consolidated that information and made more data easier for everyday folks to access. But it hasn’t made stock trading less imposing for many of us.
It’s understandable why that is. We’ve all seen media stories about the ill effects of stock market crashes (which always seem to be bigger news stories than stock market booms). We hear about how stock market investment poses an elevated risk to a family’s financial reserves. Some believe the stock market is nothing more than legalized gambling only the wealthy can afford, and that it takes an impossible amount of time and energy to become even marginally successful at stock trading.
With all this information — the risk, the horror stories, the trepidation — it’s easy to wonder: Is stock trading worth it?
Is stock trading worth it? Isn’t it risky?
Let’s start by explaining why companies issue stocks that everyday people can purchase. They need to raise capital to develop products, research, innovate, pay salaries, and maintain operations. Those expenses might not be covered by company revenue alone, especially if it’s a new company that takes years to finally turn a profit. Companies, therefore, seek outside investors.
Investment is what a stock purchase represents. It’s one of the many strategies companies employ to spur business growth and increase cash reserves. In exchange, the stock buyer is rewarded what amounts to partial ownership in the company. Just as a private company owner profits as their business grows, shareholders in a public company see their profits gain in the form of share price increases.
For that reason alone, stock trading is not gambling — you’re not just throwing coins into a slot machine and not getting anything back most of the time. You obtain real, tangible ownership.
Yes, there’s risk involved. Fortunes can rise and fall; the value of your share may increase and decrease. Understanding what goes behind stock market fluctuations takes time, but you have access to all the information you need to gain that understanding and make sound decisions. There’s no real equivalent to that kind of information in gambling — you can only make fallible mathematic assumptions and rely entirely on chance.
Don’t I have to be wealthy?
For sure, there are a lot of millionaires that have more than enough money to afford multiple stock shares. That fact often leads to the assumption that only rich people can be serious players in the stock market, and that the middle class doesn’t have the reserves or time to bother.
That may have been true long ago. But it’s not true anymore. In fact, if you’ve ever been employed at a company that offers a 401(k) plan, you’ve already owned stock — it’s just that your 401(k) fund manager has been making the decisions about what to invest. Pension funds, like 401(k) accounts, are huge contributors to the stock market, and they represent common, decidedly non-rich people who work every day.
But there’s real value in overseeing your investments yourself, and you don’t have to carry a gold card to get started. Even someone on a limited budget can afford to open a stock account and get started with a few small trades. If you have a 401(k) plan, you’re probably already lined up with an online brokerage that you can start trading on right away.
Isn’t a savings account safer?
There’s nothing wrong with having an interest-bearing savings account for a nest egg. It’s federally insured, and you don’t have to do anything at all to make sure your money stays there. However, that’s all your money will do in a savings account: stay there, maybe adding a few dollars, and change if it’s there long enough.
A savings account is safe, but it doesn’t grow substantially. It may effectively shrink a bit if the economy experiences inflation — which it will. A savings account is not a vehicle for expanding one’s wealth. It’s essentially a desk drawer.
The stock market, on the other hand, exists for the sheer purpose of generating wealth. The increases one can experience from an uptick in the stock market happen far more quickly than in a bank ledger. And even though we’ve all seen the New York Stock Exchange bottom out a couple of times in our lives, it’s been gaining steadily and consistently since 1792. It is a model of long-term, stable financial growth.
Doesn’t it take a lot of time to do it right?
You do something every day. Cooking, typing, reading, gaming, whatever it is, you do it. There was a point you didn’t do it because you didn’t know how. What happened? You learned.
That’s perhaps a simplistic way of putting it, but that’s exactly how to approach stock trading. Yes, it’s something you shouldn’t do blindly. You need to gain a basic understanding of certain aspects of public finance. You should learn about growth stocks, value stocks, the importance of diversifying a portfolio, and how to read business reports and financial information.
Maybe that amount of legwork sounds daunting, but here’s the thing: All that information is out there, right now, and easily accessible. Stock trading is not an obscure art. It’s a simple but powerful concept, based on scientific and business principles, that many people use effectively to grow wealth for retirement, college, or major purchases.
There are right ways to go about stock trading. Set aside just a little bit of money each month for investing. Learn what you can and don’t get flustered by what you don’t know yet. Diversify your holdings. Understand what makes a good stock decision. Most of all, develop a sense of patience — that’s what’s paid off for every big-name investor you’ve read about in the business section.
Is stock trading worth it? Absolutely. And it’s easier than you think.
Make stock trading worth it with Gorilla Trades
Gorilla Trades exists to help everyday investors discover how to make the stock market work for them. We apply real data and market-driven analysis to find securities with the biggest growth potential and make them accessible for new and veteran traders alike. Find out how to get started with Gorilla Trades today.