Managing your financial life is not just about money.

Investing 101 – Pt.08 Stuff You Need to Know

This is the eighth article in a series that will discuss and explain basic investment concepts in hopefully an understandable and meaningful way.  Whether you work with an investment advisor or choose to do your own investing, there are some there are things you need to know to be successful.  Here is my take on what those things are.

What is the big picture?  What is behind the long term upward movement of the stock markets of the world?  Let’s start with a question. Would you rather have been born on your birthday, or 500 years before that date?  The answer is on your birthday.  The next question is why?  The answer is that in the last five hundred years there have been huge advancements in the quality of life for most of the inhabitants of this planet.  Advancements in medicine and health care, food, clothing, shelter and transportation are just some examples.  What is responsible for all of those things?  How do people get motivated to develop or improve products and services? The answer is the profit motive of capitalism. Money is the driving force behind the vast majority of advances in our quality of life. Period.  In many countries, men and women have ideas, capital is raised and companies are formed.  Things happen.  Life gets better.  A large part of this planet has embraced capitalism.  Who doesn’t want a better life?  I sure am glad that I was born in this capitalistic country of America.

Many, not all, companies grow and prosper.  Owners (shareholders) in those successful companies become wealthy. Some companies fail. New ones are formed.  The competition is fierce.  No risk means no reward. There are winners and losers. Products and services continue to evolve and improve.  It is a wonderful thing!  A skeptic will say that there are excesses in capitalism that need to be curbed.  There is no argument from me on this subject, as long as the cure does not destroy the foundation.

Don’t bet against the future as you have no evidence upon which to do so.  As a planet we have always found ways to solve our problems and make things better.  You can dwell upon all the bad things that have happened and continue to happen if you wish; however, all of those things have not stopped the relentless advances in our quality of life.

Here is the good news: anyone reading this article can invest in the great companies of the United States, and the rest of the world, for between $100 and $250.  Just ask Investopedia!  You can have even smaller amounts deducted from your pay check and invested in your 401k.  You can also have funds debited from your checking account.  There are many financial advisors who will work with “regular people” who aren’t yet millionaires.

You have no excuses.  You can ride the great wave of capitalism by owning the great companies of the world.  Just own lots of companies (we are talking mutual funds here) and give them some time to grow.  Don’t get side tracked from your long term investment goals by whatever bad news rules the day.  Your returns are not guaranteed, but historically, the odds have been great!

All articles in this series will be posted on my website www.McNamaraFinancial.com.  If you have any question or comments I can be reached at mike@McNamaraFinancial.com.  I promise I will respond.

 

Michael J. McNamara, Ph.D., CFP®

CERTIFIED FINANCIAL PLANNER™

 

 

Disclaimer: Any financial advice in this article is intended to be generic in nature.  Readers should consult with their own financial advisors before implementing any advice or suggestions above.

Leave a Reply