Updated: Oct 6, 2018
Many people want to learn about the stock market, but not many want to put in the work necessary to achieve great returns. They say it’s boring, it’s complex, they ask me, “why do you like it?”
The following is my answer to the people who ask such an appropriate question. I say appropriate because, on the surface, the stock market is boring, it is complex, and I can’t blame anyone for thinking so. However, if you look at it with a slightly different perspective, it can come alive. And one of my main goals for Investing City is to do just this: make the stock market interesting.
Now I don’t want to make it seem like everyone has a civil duty to be interested in the stock market. I know it just won’t resonate with some people. But at least hear me out. Here are 10 reasons why I like the stock market.
1. It’s a Game
What if there was a game where you could make money if you were good? No, not a professional sport. A game in which all you had to do to improve was think. A game that allowed you to play from anywhere in the world, against the smartest people. A game that challenged you to constantly learn about the world and how people think. A game that never ends and that requires you to continuously grow and change your mind.
That game, to me, is the stock market.
I view the whole thing as a big game. You don’t need to be 7 foot or have 3% body fat or be a numbers whiz either to succeed. You just need to be interested in business. Here’s where I lose a lot of people. People become quickly disinterested in business and money and numbers. But I believe that is a function of it not being presented in an engaging way. If numbers and ratios and business jargon are thrown at you right out of the gate, your eyes will glaze over and you will become disinterested.
2. Anyone Can Play
But what if I said an important part of being a good stock picker is just being observant and living your life? Does that sound more interesting? The concept was popularized by legendary investor Peter Lynch in this book. The gist is that each of us have a leg up on Wall Street because we are consumers and we can notice things.
For example, do you have a Netflix subscription? An Amazon Prime membership? How about a Facebook account? Ever used Google? Are you reading this on an iPhone?
Unsurprisingly, each of those stocks have been some of the best performing stocks of all time, making investors billions in the process. Could you have foreseen that? I believe so. All it takes is some observation skills and an interest in learning.
3. Learning about Business
Another thing that is great about the stock market is its limitlessness. In other words, there is always something to improve. Once you scratch the surface, you open up a whole can of worms and realize just how little you know. If you think you know everything about business, I would venture a guess to say that you might know much less than you think.
If you like learning, there are few things with as much depth and breadth as business. For instance, marketing and advertising is just psychology. Finance is just organization, some math, and projecting into the future. Executives need leadership and communication skills. Strategy is just brainstorming. Operations is putting that brainstorming into action. Product design is just creating and tinkering. Business analysts need to know history. Salespeople build relationships. Essentially all topics can be covered in business, because, business is just the exchange of value.
You don’t have to think about business as people in stuffy cubicles in suits, trying to manipulate people for the ultimate goal of money. No, non-profits do business. That kid who mows your lawn from down the street does business. It’s just the exchange of value and specialization of tasks that makes our lives better and easier. The businesses that provide the most value generally end up making the most money.
4. Learn about People
An important part of analyzing a business is looking at the company founders and executives because they make most of the decisions. You can learn all sorts of things about business, life, and success from these people while reading their journeys and their writings. You can also learn what it takes to start a business of your own if that is something you seek to do.
5. Learning about Yourself
And there is yet another side to the stock market’s limitlessness; knowledge of yourself. Investing is mostly just decision making so you need to know your own decision making process and emotional biases. Being introspective and realizing why you do the things you do definitely translates outside of investing to make you more self-aware.
And you can see the results of your progress in the stock market. If you become more self-aware and improve your decision making process, you can reap the benefits in real-time. Socially, self-awareness will improve your relationships but it is a more gradual thing that is harder to notice.
In some hobbies or sports, you need other people or the perfect weather conditions. But as an investor, you can research a new company rain or shine. Plus, as long as you have internet connection, you can invest from anywhere in the world.
8. Virtuous Cycle
Once you start having some success and you see your account balance grow, it will incentivize you to start saving more and learning more. As you save and learn more you will likely do better resulting in the cycle to repeat, hopefully, forever.
Once you are in that virtuous cycle, you realize how much freedom the stock market can afford you. If you can retire 15 years earlier because of it, that’s a lot of freedom. If you can work less and spend more time with your family, that’s freedom. Typically people don’t want money because they think it looks nice. They want freedom. And the stock market is a great way to give you more freedom.
But wouldn’t it be awesome to make a positive impact on others? Isn’t that what we all want at the end of the day? Sometimes it can manifest in self-sufficiency and striving to better ourselves, but if we really look under our intentions, we seek to make impact. No one wants to die alone in a big house. That goes against human nature. We are relational beings and we want to help others. The stock market is an incredible tool to make that vision a reality.
Don’t let your life be controlled by the stock market, instead, use it as a game-like tool to learn more about this world, become freer and make a bigger impact.