The stock market is in fact the core of all capitalism and the circulation of funds makes this clear. The New York Stock Exchange alone has an average daily trading volume of around $125 billion. Europe + UK trades $20 billion worth of securities per day. Asia (China + Japan) adds about $150 billion more to the daily turnover. The Russian stock market, represented by the Moscow and St. Petersburg stock exchanges, has an average asset turnover of about $5 billion per day.
You don’t have to look far for examples of billionaires who made their fortunes buying stocks. There are many, it’s not just Buffett. Moreover, there are no secrets, and real stock market gurus provide everyone with clear step-by-step instructions on what to do.
So what then stops most people? Obviously, the main obstacle is that in order to get tangible results by the time you want to retire, you need to start investing at a fairly young age. Of course, provided that we are talking about the safest strategy.
We can talk as long as we want about the overall lack of financial literacy (which, I would like to believe, is starting to rise), but youth as such remains the key point.
The stock market, once understood, is extremely simple for long-term private investors. But hormones in youth do not leave any chances for the rational use of that modest budget that is usually present in the early years. The principle of delayed gratification does not work for many adults either. What can we say about young people.
There is nothing wrong. This is the natural work of human psychology. After all, it is completely unknown whether tomorrow will come. More often than not, though, people don’t start building their wealth in small steps, not because doom prevails over optimism about the future. As a rule, on the contrary, everyone is sure that some miracle will happen tomorrow and wealth will materialize itself out of nothing at the first request.
I am by no means claiming that this never happens. But you yourself understand that the probability of such an event tends to zero. Moreover, as statistics show, almost all known such cases (winning the lottery, sudden inheritance, etc.) end with the money being spent almost instantly and the former millionaire again returns to his original state of complete lack of money, becoming even more unhappy, than he was before the wealth that fell from the sky.
We have come to a very important point here. Financial literacy is definitely important. But much more important is self-discipline.
Many are born with sufficient self-discipline to have no problem creating capital, regardless of the initial material conditions. Sometimes self-discipline is instilled with the right upbringing, which seems to be happening less and less.
If you do not have a similar character trait, then you will have to seriously work on yourself. But you do not need to use all your willpower for this, hiding and blocking all the normal desires that, in your opinion, prevent you from achieving your goals. Suppression can only make things worse.
Self-discipline can reveal itself effortlessly if you completely change your view of the world. Perhaps the things that you previously considered extremely important are not?
Yes, it is much easier to do this in adulthood, when all bodily and mental pleasures have been experienced and their value begins to be questioned. But the older you get, the harder it will be to get real returns from the stock market.
In addition, at a younger age, an investment portfolio can (and should) be riskier to generate more profits, while closer to retirement age, it should be as diversified as possible and contain less risky and more stable instruments, as reliability becomes more important than profit.
The beauty is that you can determine for yourself a specific monthly amount allocated for the purchase of securities, which will be completely imperceptible for your, even very modest, budget.
With this amount, you buy the available number of units from your chosen ETF each month, on any date you choose, regardless of current market conditions. That is, it does not matter whether your securities are rising or falling. This is called the method of average uniform investment (or dollar-cost averaging) and there is no more effective strategy at the moment, if we consider passive investing.
You just need to learn the basics of what an ETF is (it’s very simple) and choose the best fund. Nothing more needs to be known. No need to watch the news and worry, no need to study technical analysis, no need to open the broker’s application at all, except for those times when you buy the next share. And there is no need to wait for the “right time” to buy securities.
The stock market is subject to periodic fluctuations and strong crashes occur regularly. The instability of the stock market is critical for speculators who make money on this, making dozens and even hundreds of transactions a day. But this does not excite the long-term investor. And even less the fluctuations in the indices are of concern to those who began to invest passively at a very early age.
Of course, the larger the amount for monthly purchases of shares with an average uniform investment, the faster the capital will grow. But in general, this is the way wealth is created over many years. This path requires almost no effort, and money makes money.
The stock market has more risks than a bank deposit. But it is extremely rare when interest on deposits can exceed inflation. In this regard, many investors consider the stock market, first of all, as a way to save the value of their money, and only then, as an opportunity to receive additional income.
Any world events affect the mood of the global stock market. Moreover, very deep collapses of the national markets of individual countries are possible due to political events.
But invariably, a recession is always followed by a recovery (at least it has been so far), so periods of strong stock market recession are often called “sales” of securities, which, as it were, hints that you need to urgently buy, in order to sell at a higher price later. With regard to our strategy, we can simply take more shares of the fund for the same fixed amount.
It is important to understand that the stock market is not a panacea for all financial problems and anything can happen. But so far nothing better has been invented. Entrepreneurship can make you a millionaire and even a billionaire much faster, but the chances of that happening aren’t that great considering how few new companies survive even two years and start turning a profit.
In any case, whatever you do, sound stocks (or rather stock funds) should be the most important component of your growing capital. And the sooner you learn the basic nuances and join the stock market, the better.
So, the answer to the question, is it possible to get rich in the stock market, will be positive. Moreover, this is the only more or less reliable way, proven over many decades, with real examples. And, if you’re not ready to take the real risk and become an entrepreneur, then until a meteorite hits the planet, the stock market will continue to create capital for everyone.