Block 9: For Me?
A lot of people view investing like gambling. You throw money into a few hot stocks tips and hope your “investments” increase. Investing, rather, is a process of intentional fact-finding to provide a foundation for thoughtful analysis. Phew, that was a mouthful. In other words, investing takes effort. You mean I can’t double my money overnight after googling “Best Stocks to Buy?” Sorry to tell you, but it doesn’t work that way.
Investing does take effort but we believe you can do it! It does take time and at least some interest but if you have those two things, you’re on the right path. On the other hand, if you don’t have the time or interest, click here.
Another important concept in investing is opportunity cost. Opportunity cost is the implicit cost that accompanies every decision. For instance, if you choose to watch 1 hour of TV, you implicitly not choose to go for a run, read a book, spend time with friends, or learn something new. All of those things that you could do in that hour are the opportunity costs. With that said, we know the market (essentially the S&P 500 index fund) goes up about 10% a year. So by choosing to buy an individual stock you are implicitly not choosing to buy the S&P 500. Therefore, in order to make that individual stock purchase worth it, it needs to outpace the market returns.
So if you can get 10% returns with an index fund, then why should you learn how to invest at all? Can’t you just buy the S&P 500 and call it a day? Well let’s do the math…