While the President likes to tout the strength of the stock market, which, by the way, started long before he took office, the fact remains that most Americans aren’t benefitting from the stock market boom. In fact, only 54% of American adults have investments in stocks, either directly or through a company sponsored retirement plan.
With regard to African-Americans, the picture is even more grim. Only 36% of African-American adults have investments in stocks.
Yet, throughout history stocks have proven to be one of the best tools for creating and growing wealth, so anyone who is serious about improving their financial situation should definitely include investments in the stock market as part of their overall financial plan.
WHY SHOULD WE GET SERIOUS ABOUT INVESTING OUR MONEY?
To put this in some perspective, let’s use Nike for example, since there’s been lots of talk about either buying Nike products or Nike stock after the company released its new ad campaign featuring former San Francisco 49ers quarterback Colin Kaepernick.
If we go back to January of 1985, roughly the time that Nike released the first Air Jordans to the public, shares of Nike were trading at about 13 cents a share. 13 cents!
At that time a pair of those Air Jordans would have cost you $65.
Well, if you spent that money on those Air Jordans back in 1985, today you have…well…nothing. I’m sure those shoes have long since been replaced. If you had instead put the $65 in a checking or savings account, and earned 1% per year, you would have about $90.
Today Nike shares are trading at $85.55. That’s a 69,000% increase!
So, if you had taken that $65 and bought Nike stock in January of 1985, today you’d have more than $45,000!
And before anyone dismisses this example as a one-off success, take note of this:
Between 1991 and today, a period that includes both the dot-com bust and the financial crisis, stocks in general (as measured by the S&P 500) are up more than 700%, while housing prices have increased just 164%.
Most of us simply cannot create the type of wealth that will truly move the needle for ourselves and our families by relying on our own wages or savings accounts alone.
You have to make your money work harder for you.
And speaking of working hard, Nike shares are up about 5% since they released the ad with Kaepernick, which translates to a $6 billion dollar increase in Nike’s market value.
How’s that boycott working out?
THAT SOUNDS GREAT, BUT IT ALSO SEEMS COMPLICATED TO A LOT OF PEOPLE. WHAT’S THE BEST WAY FOR PEOPLE TO GET STARTED?
You know, when a lot of us think of investing, we think of movies like Trading Places, and we think that we have to invest in complex things like pork bellies and soybeans.
But in reality, investing doesn’t have to be that complicated. I always suggest that people start by investing in what they know.
For example, I suggest that anyone interested in getting started with investing begin by going through their bank statement for the last few months and taking note of the top 20 places that they spend money.
Of those 20 places, I can almost guarantee that at least 10 of them will be public companies. (Think Apple, McDonalds, Wal-Mart, Netflix, etc.)Those 10 companies become your short list for companies that you could potentially invest in.
Now to be clear, just because you know the company, doesn’t mean that it will be a good investment. At one point we all knew Blockbuster, but of course that company is no longer around.
But by starting with companies that you know well, and doing additional research, you’ll give yourself a much better chance at success.
ONCE I KNOW WHAT COMPANIES I LIKE, WHAT DO I DO NEXT?
The last step is to open an account at a brokerage firm like Fidelity, Charles Schwab, eTrade, TD Ameritrade, etc.
They are all reputable firms and have pretty low costs.
You could also try an app like Robinhood, which doesn’t charge any trading commissions, and there’s another site called Stockpile which is great because it allows you to buy fractional shares of stock in case the amount you’re starting with isn’t enough to buy a whole share.
(So if you don’t have $1,900 for one share of Amazon, Stockpile allows you to start with, say, $20 of Amazon and you can build from there.)
But the most important thing is not the amount you’re starting with, but rather building the habit of investing regularly and staying on top of your investments.
That’s how you build real wealth over time. If you’re truly serious about learning how to make your money work harder, I’ve created a free Intro to Investing training video to help you get started.
FOR MORE IMPORTANT LESSONS ON IMPROVING YOUR FINANCES, CONNECT WITH ROB ON TWITTER @ROBWILSONTV OR AT HIS WEBSITE http://www.robwilson.tv
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