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just save into a bank account?
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05-12-2018 12:43pm#1
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The key thing you said is 'betting on the stock market'. Betting on the stock market is like renting stocks, you don't have the mindset that you own the stock. Tech enables frequent easy trading in and out.
All the market presents is an opportunity to own a portion of a business. When you do so then all told it's pretty much your's to keep. A change of mindset where 'ownership' is your guiding principle then when the market inevitably drops then it presents an opportunity to increase your ownership at a lower price. Ryanair and BOI become cheaper to own.
You buy a stock to own and three things can happen;
1. The price stays the same. Assuming it pays a dividend, then you get a perpetual stream of income cash so long as the enterprise remains solvent and capable of giving you your cut of the profits. You can even re-invest the cash for more ownership and thus more dividends.
2. The price increases. You get the Dividends and your net worth increases.
3. The price drops. You get the dividends and you get to buy more ownership with more bang for your buck.
Market corrections, crashes and dips are buying opportunities. It is the best businesses on the planet presenting you with an opportunity to own them at bargain prices. Remember, the price is just the price someone is willing to pay you for your ownership of a company. Earnings and revenue are far more important than the asking price. Nobody knows what the future holds but from a risk averse perspective, winning companies will likely continue winning and if you stuff a portfolio with proven winners it should be better in the LONG term, current and future dips becoming blips over the expanse of decades and generations.
You can only ever lose whatever you put into a stock. The amount the value can go to is 0. (unless you are leveraging which is dangerous). The amount it can potentially go to over decades and through generations is limitless. To sell during a panic might be potentially costing you hundreds of thousands or millions of $$ over a long enough time frame.
Imagine if your grandmother bought say Boeing around the time Kennedy was assassinated, never sold, gave them to your mother who will plan on leaving them to you. On a 'split' adjusted basis each Boeing stock is something like $0.1190 cents. Today it's around $330. Whatever she invested in the stock is worth 2,773 times what was invested and that is just the capital gain never mind 5 decades of dividends. To build a boeing plane will cost you more than it did in the 60's hence the capital gain.
$100 invested with no dividend re-investment would be worth $277,300 today. With dividend reinvestment you'd be a millionaire easily. Compounding is that incredible. Even something dull and boring like spices company McCormick (they own the Schwartz brand here, go look through the cupboards at home, bet you there will be one there
). If the same $100 was invested in 1980 it is now 8 cents on a split adjusted basis. Today at $150 it is 1,875 times more valuable ($187,500). A brilliant business, owned forever.
Wouldn't you be glad Granny and your mother never got cold feet and sold during market crashes? If she put her $100 in the bank at 2% interest in 1963 and did nothing else it would be worth $297 assuming the bank remained solvent.
In short, the market is simply a place to buy into a business which you personally don't run but to which you lend some money to run. Some will go bust, some will stagnate, some will explode (not literally!) but all you need is one/two long term thoroughbreds to easily make up for the laggards. So long as you don't need the money, you are free to let it compound for decade after decade.
We just never had an ownership mentality in Ireland. I lived in an area of Cork City in Knocknaheeny. Apple set up a plant there in 1980, the year I was born. My mother was actually starting a job there as a cleaner but got pregnant with me and couldn't take the job. The company went through boom, bust, recession, near bankruptcy and then boomed again to become the first trillion dollar company. Now with such a famed company, even in the mid-80's, with it's European headquarters on our door step, did it ever occur to me or my parents that we were perfectly free to own a part of the company? I didn't even know you could and neither did they. That mentality was never there. I my mother invested and gifted $100 in "this new company" opening up for me when I was born it would have been 3 cents on a split adjusted basis. When it reached the $1 trillion bench mark in September that $100 would have been worth $333,300. Not a bad return.0 -
Join Date:Posts: 33566
The key thing you said is 'betting on the stock market'. Betting on the stock market is like renting stocks, you don't have the mindset that you own the stock. Tech enables frequent easy trading in and out.
All the market presents is an opportunity to own a portion of a business. When you do so then all told it's pretty much your's to keep. A change of mindset where 'ownership' is your guiding principle then when the market inevitably drops then it presents an opportunity to increase your ownership at a lower price. Ryanair and BOI become cheaper to own.
You buy a stock to own and three things can happen;
1. The price stays the same. Assuming it pays a dividend, then you get a perpetual stream of income cash so long as the enterprise remains solvent and capable of giving you your cut of the profits. You can even re-invest the cash for more ownership and thus more dividends.
2. The price increases. You get the Dividends and your net worth increases.
3. The price drops. You get the dividends and you get to buy more ownership with more bang for your buck.
Market corrections, crashes and dips are buying opportunities. It is the best businesses on the planet presenting you with an opportunity to own them at bargain prices. Remember, the price is just the price someone is willing to pay you for your ownership of a company. Earnings and revenue are far more important than the asking price. Nobody knows what the future holds but from a risk averse perspective, winning companies will likely continue winning and if you stuff a portfolio with proven winners it should be better in the LONG term, current and future dips becoming blips over the expanse of decades and generations.
You can only ever lose whatever you put into a stock. The amount the value can go to is 0. (unless you are leveraging which is dangerous). The amount it can potentially go to over decades and through generations is limitless. To sell during a panic might be potentially costing you hundreds of thousands or millions of $$ over a long enough time frame.
Imagine if your grandmother bought say Boeing around the time Kennedy was assassinated, never sold, gave them to your mother who will plan on leaving them to you. On a 'split' adjusted basis each Boeing stock is something like $0.1190 cents. Today it's around $330. Whatever she invested in the stock is worth 2,773 times what was invested and that is just the capital gain never mind 5 decades of dividends. To build a boeing plane will cost you more than it did in the 60's hence the capital gain.
$100 invested with no dividend re-investment would be worth $277,300 today. With dividend reinvestment you'd be a millionaire easily. Compounding is that incredible. Even something dull and boring like spices company McCormick (they own the Schwartz brand here, go look through the cupboards at home, bet you there will be one there). If the same $100 was invested in 1980 it is now 8 cents on a split adjusted basis. Today at $150 it is 1,875 times more valuable ($187,500). A brilliant business, owned forever.
Wouldn't you be glad Granny and your mother never got cold feet and sold during market crashes? If she put her $100 in the bank at 2% interest in 1963 and did nothing else it would be worth $297 assuming the bank remained solvent.
In short, the market is simply a place to buy into a business which you personally don't run but to which you lend some money to run. Some will go bust, some will stagnate, some will explode (not literally!) but all you need is one/two long term thoroughbreds to easily make up for the laggards. So long as you don't need the money, you are free to let it compound for decade after decade.
We just never had an ownership mentality in Ireland. I lived in an area of Cork City in Knocknaheeny. Apple set up a plant there in 1980, the year I was born. My mother was actually starting a job there as a cleaner but got pregnant with me and couldn't take the job. The company went through boom, bust, recession, near bankruptcy and then boomed again to become the first trillion dollar company. Now with such a famed company, even in the mid-80's, with it's European headquarters on our door step, did it ever occur to me or my parents that we were perfectly free to own a part of the company? I didn't even know you could and neither did they. That mentality was never there. I my mother invested and gifted $100 in "this new company" opening up for me when I was born it would have been 3 cents on a split adjusted basis. When it reached the $1 trillion bench mark in September that $100 would have been worth $333,300. Not a bad return.
And what if they had picked a loser instead of Boeing or Apple? They would have lost a lot or even all of their money. What if they bought into Eircom when the government sold it off or bought into the banks back before the crash or bought into bitcoin late last year as many people did.
By cherry picking just one or two companies with the benefit of hindsight you can show that investing is a great idea that will turn you into a millionaire or a bad idea that will lose you every cent you put into it.
@OP - Investing is risky. More risky than putting money into a bank (which isn't exactly 100% risk free either). One of the keys to minimising risk is to diversify. Invest in many companies and many industries. If one company does poorly or even goes out of business then you haven't lost everything and hopefully the others will make up for it.0 -
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I have to highlight a few things here -The key thing you said is 'betting on the stock market'. Betting on the stock market is like renting stocks, you don't have the mindset that you own the stock. Tech enables frequent easy trading in and out.
All the market presents is an opportunity to own a portion of a business. When you do so then all told it's pretty much your's to keep. A change of mindset where 'ownership' is your guiding principle then when the market inevitably drops then it presents an opportunity to increase your ownership at a lower price. Ryanair and BOI become cheaper to own.
You can also take the view that as long as the dividend is secure, buying in at a lower price gives a more attractive dividend yield.
You buy a stock to own and three things can happen;
1. The price stays the same. Assuming it pays a dividend, then you get a perpetual stream of income cash so long as the enterprise remains solvent and capable of giving you your cut of the profits. You can even re-invest the cash for more ownership and thus more dividends.
If the yield is attractive enough.
2. The price increases. You get the Dividends and your net worth increases.
If the price increases, the issue of the dividend recedes. Net worth increases by either dividend or capital appreciation.
3. The price drops. You get the dividends and you get to buy more ownership with more bang for your buck.
Again, assumes the dividend is secure.
4. Company goes bust. The order of payout bites, and you lose it all.
Market corrections, crashes and dips are buying opportunities. It is the best businesses on the planet presenting you with an opportunity to own them at bargain prices. Remember, the price is just the price someone is willing to pay you for your ownership of a company. Earnings and revenue are far more important than the asking price.
Earnings and revenue are absolutely not far more important than price. They are intrinsically linked to the asking price, in a rational/longterm market. In fact, the most basic financial ratio of them all, the P/E ratio tells you that.
Corrections, crashes, and dips are only buying opportunities if the stock is undervalued. It may not be, that is the risk.
Nobody knows what the future holds but from a risk averse perspective, winning companies will likely continue winning and if you stuff a portfolio with proven winners it should be better in the LONG term, current and future dips becoming blips over the expanse of decades and generations.
Why not just buy the market ? Why try to be smarter than those doing it full-time ? It would be interesting to see their strike rate, and in the long term, how many of them have outperformed the market ?
You can only ever lose whatever you put into a stock. This is just not so. You can lose not only what you put in, but also all the capital appreciation and reinvested dividends that gave you the increase in your net worth you mentioned earlier.
Which would you prefer - to buy £100 of stock and it tanks, or buy £100 of stock, see it go to £1,000, neglect to take your profits and go in the toilet. Would you treat the two sitations the same ? I wouldn't. The amount the value can go to is 0. (unless you are leveraging which is dangerous). The amount it can potentially go to over decades and through generations is limitless. To sell during a panic might be potentially costing you hundreds of thousands or millions of $$ over a long enough time frame.
Imagine if your grandmother bought say Boeing around the time Kennedy was assassinated, never sold, gave them to your mother who will plan on leaving them to you. On a 'split' adjusted basis each Boeing stock is something like $0.1190 cents. Today it's around $330. Whatever she invested in the stock is worth 2,773 times what was invested and that is just the capital gain never mind 5 decades of dividends. To build a boeing plane will cost you more than it did in the 60's hence the capital gain.
$100 invested with no dividend re-investment would be worth $277,300 today. With dividend reinvestment you'd be a millionaire easily. Compounding is that incredible. Even something dull and boring like spices company McCormick (they own the Schwartz brand here, go look through the cupboards at home, bet you there will be one there). If the same $100 was invested in 1980 it is now 8 cents on a split adjusted basis. Today at $150 it is 1,875 times more valuable ($187,500). A brilliant business, owned forever.
Wouldn't you be glad Granny and your mother never got cold feet and sold during market crashes? If she put her $100 in the bank at 2% interest in 1963 and did nothing else it would be worth $297 assuming the bank remained solvent.
In short, the market is simply a place to buy into a business which you personally don't run but to which you lend some money to run.
This is a misconception. You are not loaning money to the business for it's running. The ordinary day to day trading of stocks on the secondary market has no real bearing on the day to day fortunes of the business. Except in the sense that bursting into the FTSE 100 might bring down it's cost of borrowing. Secondly, as you already pointed out, share ownership is not loaning the money to the company, it is ownership of the company. Some will go bust, some will stagnate, some will explode (not literally!) but all you need is one/two long term thoroughbreds to easily make up for the laggards. So long as you don't need the money, you are free to let it compound for decade after decade.
We just never had an ownership mentality in Ireland. I lived in an area of Cork City in Knocknaheeny. Apple set up a plant there in 1980, the year I was born. My mother was actually starting a job there as a cleaner but got pregnant with me and couldn't take the job. The company went through boom, bust, recession, near bankruptcy and then boomed again to become the first trillion dollar company. Now with such a famed company, even in the mid-80's, with it's European headquarters on our door step, did it ever occur to me or my parents that we were perfectly free to own a part of the company? I didn't even know you could and neither did they. That mentality was never there. I my mother invested and gifted $100 in "this new company" opening up for me when I was born it would have been 3 cents on a split adjusted basis. When it reached the $1 trillion bench mark in September that $100 would have been worth $333,300. Not a bad return.0 -
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