Groundwork for a lifetime of investing in Stocks

The Pros and Cons of some basic investments.

Stocks

Stocks are likely to be the best investment you will ever make, outside of a house. 

When you buy a bond, you're only making a loan, but when you invest in a stock, you're buying a piece of a company.  If the company prospers, you share in the prosperity.  If it pays a dividend, you'll receive it, and if it raises the dividend, you'll reap the benefit.  Hundreds of successful companies have a habit of raising their dividends year after year.   This is a bonus for owning stocks that makes them all the more valuable.  They never raise the interest rate on a bond!

Stocks have outdone other investments going back as far as anybody can remember.  Maybe they won't prove themselves in a week or a year, but they've always come through for the people who own them.

More than 50 million American have discovered the fun and profit in owning stocks.  That's one in five.

These aren't all whizbangs who drive Rolls-Royces.  Most of these shareholders are regular folks with regular jobs:  teachers, bus drivers, doctors, carpenters, students, your friends and relatives, the neighbours in the next apartment or down the block.

You don't have to be a millionaire, or even a thousandaire, to get started investing in stocks.  Even if you have no money to invest, because you're out of a job or you're too young to have a job, or there's nothing left over after you pay the bills, you can make a game out of picking stocks.  This can be excellent training at no risk.

People who train to be pilots are put into flight simulators, where they can learn from their mistakes without crashing a real plane.  You can create your own investment simulator and learn from your mistakes without losing real money.  A lot of investors who might have benefited from this sort of training had to learn the hard way, instead.

Friends or relatives may have warned you to stay away from stocks.  They may have told you that if you buy a stock you're throwing your money away, because the stock market is no more reliable than a casino.  They may even have the losses to prove it.  Looking at the annual rates of returns of selected investments, stocks been the best performers, averaging 11% annualy over decades.  If stocks are such a gamble, why have they paid off so handsomely over so many decades?

When people consistently lose money in stocks, it's not the fault of the stocks.  Stocks in general go up in value over time.  In 99 out of 100 cases where investors are chronic losers, it's because they don't have a plan.  They buy at a high price, then they get impatient or they panic, and they sell at a lower price during one of those inevitable periods when stocks are taking a dive.  Their motto is "Buy high and sell low," but you don't have to follow it.  Instead, you need a plan.

This introductory material hopefully will lay the groundwork for a lifetime of investing.