The Taboo of Investing in the Stock Market

by Adam on April 26, 2010

There’s a taboo attitude towards investing

It is particularly prevelant in the UK and it’s certainly there amongst my friends. For example, most would feel more comfortable buying a house worth more than they will earn in 10 years, than putting any money in the stock market. You may be able to see your investment right in front of you with a house but if you are not investing in equities (i.e. stock and shares where you buy part of the company and therefore get ‘equity’) you are missing out on a great way to grow your pennies over the long term.

Here are 4 reasons why people don’t invest and why you should:

1) I don’t have enough money

Quite simply most 20 some-things (and even older) never get around to saving let alone using savings to invest. Over the last few weeks Magical Penny has explored this subject in depth so hopefully you should be well on your way to being in control of your money rather than allowing money control what you do. (New readers click here and here)


2) I have other priorities for my money

Once you have passed the stage of not saving at all you’ll realise that having savings gives you lots more options.

It’s great.

But it brings with it more questions:

  • Do you spend your savings on a better car?
  • Do you pour it into a house?
  • A business?
  • Or do you save it and not touch it?

Finding the right balance is personal to you but if you knew the impact of what a few pennies can grow into over the long term, I’m sure you’d reconsider spending as much on the things you want today. You would appreciate that today’s choices could cost you vast sums of tomorrow’s pennies.

Even if you decide to spend most of your savings on other things, perhaps starting a business or buying a house, investing is still a great thing for you to do because it offers diversification –by spreading your money around you help lower your risk: You are less likely to lose it all whilst giving your pennies the best possible chance to grow.

Spreading your money around a few different goals means you will have less money going towards each goal but thankfully that’s not a problem…

3) You don’t need huge savings to invest

When I first started reading about investing I imagined it was the reserve of the rich. I imagined trades involving thousands of pounds moving in and out of the next hot stock. This still does happen but there have been considerable advances in the financial markets in recent years that have made it far easier for everyone to invest: you don’t need huge piles of cash to invest in the stock market.

If you take away anything about investing from this article I hope it’s this:

You can begin investing with zero transaction costs and zero fees for as little as £50 a month.

(The no-fee part is important as of course you could buy shares in individual companies for a few pennies each but you pay a huge amount in fees by doing this)

If you’re completely new to investing the first thing you’ll notice is the industry is full of fees. Stock brokers and investment bankers need to afford their sports cars and tailored suits somehow!

However, there are investments you can make that have minimal fees and allow you to start investing without a huge pile of cash. Championing this type of investing is the core message of Magical Penny so naturally you’ll be reading how to do this in up-coming posts on the blog.

4) Investing is scary and overwhelming

Much of the taboo about stock investing is because the investment world is unknown to most of us. And the unknown can be scary. However, stock market investing is worth learning about – and the basics are not as complex as you may think either.

Investing in equities simply means you become a fractional owner of the businesses of the world. There are good businesses and bad businesses but collectively they create value each and every day as people wake up, head to work and make their contribution to the planet.

The value of those businesses goes up and down all the time as the world is never the same place from one moment to the next. But over the long term people recognise value and pay accordingly for it. Investing gives you a chance to be part of the value-creation system, and therefore tends to lead to increasingly growing pennies over the years.

As a side-note, some people think the stock market is simply a money making machine. In some ways it is but it’s not magical: the money the companies get from selling shares to investors is used for business development and growth; helping them develop efficiencies in production. Businesses can therefore grow by selling shares and they give you a chance to take advantage of that growth. Make sense?

Ultimately if you think investing is overwhelming though, you’re right.

Like all unknowns: it can be.

But if you keep reading Magical Penny, it might just become a little less overwhelming and a little less taboo.

I’m happy to answer any questions in the comments too so thanks for stopping by.

{ 7 comments… read them below or add one }

Jon

I’ve made my comments clear on my suspicions of the long term benefits of the stock market vis-a-vis mortgages and pensions, but your 50-100 per month plan sounds intriguing to support what I’ve got already. Who knows, I might be fully won around, but I think I’m definitely ready to investigate. Get a shift on and share your investment bookmarks though!

Reply

The Other Adam

Hi Adam

I’m very much looking forward to your series on this. I am open to the idea of investing, but my extreme lazyness and ‘fear’ of the subject is what is currently holding me back. Let’s see if you can peruade me to give it a go!

Reply

Adam

Thanks -I hope you don’t think I’m being too much of a teese Jon and Adam -I just want to get everything covered before I say: “Do this” or “do that” when it comes to investing.

Reply

ctreit

Investing is indeed scary, but it is not the only thing that is scary. If you put your cash “safely” under the mattress for 20 years, you will find out that the cash has lost a lot of value. Somehow we don’t think that putting money under the mattress is not scary, but it is just as scary as not investing at all.

Reply

Kate

It definitely is a very daunting idea to get involved in investing. I am going to bookmark this as it is a great article. Thanks for the information.

Reply

Adam

Great point ctreit -its harder to grasp for some but the opportunity cost of not investing is huge.
Equally important, ANY postive thing you do with your youth (career, relationship, education) will have a huge impact on the rest of your life. People sometimes forget the impact of non-monetary things too.

@Kate -thanks Kate for commenting and bookmarking it for reference: I understand that it might seem scary as I was where you are 3 years ago. I’ll do my best to explain everything so you can decide if it’s the right thing for you to do too.

Reply

Alex Burda

HI……Equally is importan for everyone so i think because investing money is fear full as we but not investing is the fear full as well so i think these things are same think positive and do positive good blog .

Reply

Leave a Comment

{ 1 trackback }

Previous post:

Next post: