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3 Reasons to Start Investing in Stocks Today

There are no such things as bad investments, just bad investors. Before you get in the stock market you need to get educated.

play cashflow now

It’s rocky times for the stock market. The perfect financial storm seems to be gathering.

Inflation is high. Interest rates are going up. Layoffs are happening. The world is on the brink of war. And the pandemic still keeps hanging on.

As the New York Times wrote a couple days ago,

“Stocks rose 2.4 percent on Friday, but not enough to make up for a week of declines. It was the sixth consecutive week of losses for the stock market, the first time that has happened since 2011. The S&P 500, which has been flirting with a bear market, or a drop of 20 percent, is down more than 16 percent since its peak in January. It may fall further as inflation persists and a recession looms.”

At the same time, US companies are posting record profits. And some of the glut of overpriced stocks are flushing out.

But regardless of whether the stock market was soaring, or whether it was crashing, I contend that now is the time to get into stocks.

Why???

It’s not because we are in a potential stock correction—where overvalued stocks are knocked down to reasonable prices. And it’s not because stock prices dropped and are basically on sale. It’s because you should always be in the stock market. Let me explain.

There are three characteristics about the stock market that make it such a great vehicle to build wealth. Remember the richest man in the world, Warren Buffet, he used the stock market to build his wealth. The three characteristics are:

  • Liquidity

  • Agility

  • Scalability

Stocks are liquid investments

When investing in stocks, you can choose how you want to get profits. The two primary approaches are to seek capital gains (selling our stocks at a higher price than we paid for them) and to generate cash flow (creating new money).

Seeking cash flow is the Rich Dad way because it allows you to control the situation better than just buying stocks. Either way, the stock market offers us the ability to easily buy and sell your paper assets. This is liquidity—the ease with which an asset can be converted to cash. Because the stock market is so liquid, you can buy and sell in minutes.

By comparison, there are many people who would love to sell their real estate. But there’s just one problem—it’s a long process to sell. You need to do a listing and market. The buyers need financing, which can take a month or more and is sometimes hard to get. And often a deal can be prolonged for a variety of reasons. It sometimes take months to sell your real estate. So why it is an excellent investment, real estate is not liquid.

When considering your overall investment portfolio, liquidity is important. There will be times when you’ll want to cash in on your investment quickly in order to take advantage of another opportunity. So one thing you will love about the stock market is it offers investors good liquidity. If one of your stocks begins to go down, the market liquidity allows you to sell it quickly before you have sustained a damaging loss. It also allows you to go from a good investment to a better investment in the blink of an eye.

Another advantage of liquidity is that a person doesn’t need to have tremendous sales and negotiation skills. Stocks allow you to make sales without being a salesman. That’s a huge advantage to a lot of people. Just click a button and... sold! You don’t even need to be charming.

There’s some irony to the liquidity of the stock market, because very few people actually take advantage of it. Many investors hold the same stocks and mutual funds year in and year out, and never think about selling a good stock for a better one or using any kind of exit strategy to maximize their profits. There is also a little hypocrisy here on the part of the big institutions that tell you to buy and hold. Stocks only fall when there are more sellers than buyers. While you are holding, the large institutions are often the ones selling!

Another thing to consider is that the liquidity of the market can bring an increase in volatility. The ability to buy and sell quickly can cause huge swings in supply and demand. Depending upon your situation and investing goals, this can be either a huge negative or a huge positive. There is not a one-size-fits-all answer. Right now we are starting to see volatility. There will probably be even more volatility in our market in the years ahead. But the right investing strategy can use that volatility to your advantage!

Investing in stocks makes you agile

When most people think about profiting from movement in the stock market, they think of one direction of movement: up. They don’t understand the concept that stocks are agile. You can learn to profit from a stock no matter if it goes up, down, or sideways. That’s very tough to do in business, but in the stock market, it doesn’t matter—because there are profit strategies for movement in any direction.

The stock market is probably one of the easiest investing vehicles to earn a profit in relation to the economy. When the stock market goes up you can buy stock, and when the stock market goes down you can short stocks (shorting a stock is positioning yourself to make money when the price falls).

If you use the stock market and the options market in harmony with each other, there are many income strategies that can provide cash flow even when the stock market is stagnant or going down. Wrote quite a bit about this in a recent blog post, “Investing for Cash Flow With Stocks.”

Stocks investments give you the ability to scale

There is a common misconception that you need a lot of money before you can begin to invest. Fortunately, investing in stocks allows almost anyone to begin their investing sooner rather than later.

Because buying stock is buying only a share of a company, buying stock is more affordable for the average person than buying an entire company or starting a business. But the beauty of this is that you can own exactly the same stocks as a famous investor like Warren Buffett. The difference is that, as a new investor, you’ll probably buy a smaller number of shares than Buffett.

A company you want to invest in may be a multi-billion dollar enterprise, but you may be able to get a single share of its stock for just $25. The cost effectiveness of stock allows you to scale up into your investing as you gain the means to go bigger. For the average person, this is a faster way to invest than saving up for decades to purchase a franchise or some other business.

Another avenue of profitable stock market investing is the options market. An option is the right to buy or sell a particular thing at a specified price within a set time frame. Just as we saw with stocks, options are also a very affordable way for anyone to begin their investing. As you advance in your knowledge and experience with options, you might be surprised to find just how much stock you can take control of for relatively small amounts of money and risk. If you want to learn more about how to invest in the stock market in options and in other ways, I encourage you to dig into Rich Dad Advisor, Andy Tanner’s work. Andy is the best expert I know on how to use the agility of the stock market to get rich.

Scalability permits almost anyone to quickly place an asset on his or her financial statement. In fact, acquiring an asset with stocks can be done faster than any other asset class.

One word of caution about investing in stocks

No investment is good or bad. There are no such things as bad investments, just bad investors.Your investment is only as good as you are. Before you get in the stock market you need to get educated.

There are so many ways to get going with your education. You can take online courses, attend local workshops, or read a bunch of books.

But please, do not go into stock investing without first investing in yourself and your education.

Original publish date: August 25, 2015

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