The word INVESTING is so prevalent today. It has been for a while. When someone is speaking of investing, there seems to be a subtle understanding that to invest is to become rich. That the richest are the most successful at investing. But there are millions of people promoting stocks but almost none making millions actually trading in stocks.
The idea promoters are selling you is that you can become rich by carefully investing in stocks. This is a scam that so many people have fallen for. Allow me to dispel this dangerous lie.
Despite what the mainstream media and horde of YouTubers want you to believe, investing your money in stocks will not bring you financial salvation. Here’s why:
- Stocks don’t give you an income: Most stocks don’t pay dividends, and unless you hold millions of shares, your dividend income will be as impactful as your income from bank interest. You only realize any gains after you sell stocks too.
- Stocks are a gamble: So many people (with vested interests) position stocks as something you can work out mathematically if you adopt a cold analytical approach. But stock prices are not based on hard financial data but on the market’s emotions. It’s based on how people feel the company will do in the future. How people feel about a recent controversy. How people feel about the economy. You can’t predict emotions that will affect the stock price in the future.
- You cannot pick winners in the stock market: Let’s say you are a genius. A wealthy one too, since you have millions of dollars ready to commit. And as an accredited investor with at least a million dollars in liquid assets, you are granted access to investments that are off limits to others by law. You are also willing and able to commit 80 hours a week to picking stocks. Naturally, you don’t have a girlfriend, boyfriend, spouse, or children, because you will devote every waking minute to researching stocks. Consider your bathroom breaks to be your new vacation.
Well, I want you to imagine that you’ve made a thousand copies of yourself with this work ethic, all equipped with 24K per year Bloomberg terminals, sophisticated algorithms developed over decades, and AI tech purchased for millions dollars. Surely you have a glimmer of a chance of success now, right? Because that is what you will be competing against, and firms with all this and much more still struggle to beat the annualized returns of the overall stock market. You can pick winners once or twice, but it is exceedingly challenging to consistently outperform the market year after year. If you’re investing in a company that has been featured in the news, you’re too late. Yes you can still invest in Apple or Tesla and see your shares grow in value, but most of the tremendous gains have already happened.
How many rock star stock traders have you met in real life? How come there are zero, yes zero, stock trading billionaires? If you just buy an index fund (a mix of all the biggest companies on the stock market), you’ll average 9.5% year after year over 30 years. So if you invest 100K today, you’ll have $1.5M in 30 years. Remember that your purchasing power decreases every year due to inflation. So in today’s money, it’s more like $760K.
But if you have a regular job and manage to save $50K per year for 30 years, you’ll also have $760K (in today’s money) in 30 years. This doesn’t exactly fire me up with excitement. But you’re not a sucker, you’re a savant! So you’ve been able to more than double the return of your stock trades. Investing the same 100K, with 20% return year over year you’ll have $3.8M in 30 years, or the purchasing power of $1.9M today.
I don’t know about you but I can’t call waiting 30 years to only have $1.9M a success. No wonder you haven’t actually come across any stock trading millionaires, they must be in retirement homes! To be clear, there are lots of people that have made money with stocks. Just not with buying them. All the news stories you’ve seen are about:
- Startup founders who are having an initial public offering (IPO) for the first time, in other words, SELLING stocks to the public
- The very first employees of Google, Apple, Airbnb with stocks that have been granted to them when they were still private companies and cashing out, by SELLING stocks to the public
- CEOs of Fortune 500 companies who have been granted stock options in the past (the ability to acquire shares in the company in the future at today’s price) and are now cashing out, by SELLING stocks to the public
- Hedge fund tycoons MANAGING stocks on behalf of individuals and institutional investors, making 20% of the gains and 2% of the capital managed, even if they make a loss
As you can see, these scenarios differ from yours because they are selling or managing stocks, hence it’s really deceiving for someone to be saying, “hey look at these guys, they made money with stocks and so could you!” Let’s also recall what stocks actually are. They are an instrument that allow companies to raise capital in exchange for giving equity. Do you think the seller or buyer of stocks benefits more?
The Media's Biggest Lie
Then why do so many people promote stocks? Because it makes people wealthy (just not you!). Why do YouTubers promote stocks? Because they make money from ads, affiliates, merchandise, online courses, coaching, books and commissions from trading platforms. Why does the mainstream media promote stocks? Because they make money from ads, online courses, consulting work, books and commissions from trading platforms. Talking, discussing, debating, and being a proponent for buying stocks gives you a bountiful array of revenue streams.
Positioning yourself as someone not promoting stocks in the media space would only produce one article (this one!). Do you think I could make more money by writing a 100 articles about buying stocks (plus online courses, sponsorships and affiliates related to trading stocks), or just one article telling you not to buy stocks? Hopefully you understand why the former is far more lucrative and how that explains the crazy abundance content out there with a vested financial interest in selling you this myth / scam / lie of an idea.
If you’ve found this useful, go to buystocks.com and use promo code ImAHypocrite for 20% off your first trade. And go buy my courses because that’s how I actually make most of my money! All kidding aside…
A lot of people have lost their hard earned money with this make believe fantasy that they would somehow beat the stock market and become rich by buying stocks. The abundance of cable TV networks, news channels, websites and books dedicated to stocks can really make you believe in this scam. So if that saddens or angers you too, or you found this article interesting, share this with your friends to make sure they don't fall for the trap. And if you want to help put an end to this myth, tweet out this article!
If you have any thoughts or questions, reach out @NetWorthExplained
The American dream is well and alive, so now read how to actually make a lot of money.
