Why is stock investment a better way to manage money?

This article will tell you from the most vernacular and ordinary people’s point of view, using the most concise reasons: why stock investment is the better way of financial management for modern people?

Table of Contents

Let the numbers speak

The Statistics from Siegel’s book “Stocks for the Long Run”: The real total return rate from 1802 to 2012 is as follows:

The annualized annualized rates for various assets are: 6.6% for stocks, 3.6% for bonds, 2.7% for Treasury bills, 0.7% for gold, and -1.4% for the U.S. dollar.
Initially investing 1 US dollar, after 211 years, the final accumulated asset values of various assets were: stocks 704,997, bonds 1,778, treasury bills 281, gold 4.52, and US dollars 0.05.

One person can do it

The vast majority of investors mistakenly believe that people with a financial background and working in the financial sector, companies, and banks have inherent advantages in stock market investment. In fact, this myth is not correct. The stock market is one of the few careers that only one person can pursue for a lifetime. If you want, you can start by recognizing words and work on it until the moment you die.

Moreover, there is a characteristic of stock market investment. It is an unwritten convention in the business world that the more money or the more people you have, the easier it is to get things done. Most of the time, it is harmful when used in stock market investment. The reason is that a person’s decision-making can actually have a negative impact on the stock market. Stock investments are more beneficial. Decision-making bureaucracy, a necessary evil in the existence of enterprises, is the biggest killer that hinders investment success. Investors only need to look at the poor investment performance of stock fund managers to understand.

Retail investors have advantages

I know this subtitle subverts most people’s opinions, but retail investors have more pros than cons when investing in stocks. Why do you say that? If you take a look at the performance returns of stock funds around the world, you will understand everything. For this part of the discussion, please refer to my following post:

“Investment concept not worth trying at all“
“The disadvantage of retail investors“
“The advantages of retail investors“
“Why do stock funds perform so poorly? How bad is it?“
“Any strong reason to buy mutual fund?“

“Are there any reasons to buy stock funds?” Can’t find even one”

“Why is the performance of stock funds so inconsistent?” How bad is it? 》

Nothing to do with background

It has nothing to do with academic experience, family background, IQ, or socioeconomic status. As long as you have the ability to read newspapers, the success of investing in stocks has nothing to do with it. Successful investment requires extraordinary insight and the ability to think independently, rather than being gregarious or embracing the opinions of the majority. Therefore, people with high IQs who require complex minds and profound knowledge are prone to failure when investing in stocks.

Being a “Mensa member” does not guarantee that you will become rich by investing in stocks. For this part of the discussion, please refer to my following post:

However, the success of stock investment is closely related to the investor’s personality. This part will not be repeated here, please refer to the following articles on this blog:

Nothing to do with fund size

There are no capital thresholds and almost anyone qualifies. For this part, please see the detailed discussion in my previous post: “The correlation between fund size and return on investment“.

No need to look at people’s faces

When you go to work, you have to look at your boss’s face, endure unreasonable customer demands, and are forced to deal with annoying colleagues every day.

Have great flexibility

There are no restrictions on time and place, and there is great freedom. Especially now that the Internet is developed and information flows rapidly, it is difficult to be isolated from global financial information even in the remotest corners of the world.

Will be profitable in the long run

Unless you just treat the stock market as a casino or do short-term speculation, stock investment will almost always be profitable in the long run. Moreover, long-term investment in the stock market is the best way to accumulate compound interest. You can refer to my following article for this part:

“Stocks are the best bet for long-term investors“
“The Compound Effect“
“The power of compound interest“
“Simple and compound interest calculator“
“Why long-term investment is better?“
“The great enviable advantages of young people investing in stock“

Disclaimer

The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.