Being a financial planning firm that manages over a billion dollars, we are no stranger to the stock market. Naturally, a good portion of the dollars entrusted to us are invested there. Some clients have smaller exposure and some larger. Generally speaking, one’s equity exposure performs substantially better over time, than their fixed income or bond exposure.
We often preach the benefits of stock market investing. It takes some resolve to stay invested, of course, however it still remains one of the best, surest ways to grow one’s wealth over time. I’m here today to give you five solid reasons why you should take comfort and believe in the long-term viability of the stock market. In my experience, there is virtually no better way to consistently grow your wealth.
Reason 1- Massive Companies
I think most people lose sight of how large stock market companies are. If you don’t happen to work for a publicly-traded company it will really blow your mind. A small-cap stock is one with a market cap (or value) of $300 million to $2 Billion! Listen, I am the owner of a company, and let me tell you, to get to a $300 million dollar value is a massive achievement. These are companies that aren’t fly-by-night companies, and THESE ARE THE SMALLEST OF COMPANIES IN THE STOCK MARKET.
These companies have a proven product and service. They tout loyal customer bases and a competitive edge that has allowed them to carve out a nice piece of their marketplace. Now when you go upstream here you’ll find that mid-cap companies are one’s worth $2 billion to $10 billion, and large cap companies are over $10 billion in value. Furthermore, when you think about most of the household brands like Amazon, and Apple they are classified as Mega Cap stocks, which have a market cap of over $200 billion.
I say all this to give you comfort that when you put your hard-earned money in the stock market you truly are buying ownership in these massive companies.
Reason 2- Smart People
Speaking of these massive companies, they aren’t run by you or me haha. They are generally run by the best of the best. Ivy league grads, Wharton MBA’s, and well-established businessmen and women. These are people that simply think differently and are extremely savvy. Simply put – if you were at the race track and I read you any of their resumes you would have no hesitancy in placing bets on any of these individuals.
In addition, we aren’t just talking about CEO’s as intelligent women and men. You look down the entire executive team and these are insanely intelligent human beings. They are the best of the best and hired to do one thing and one thing only….. make us money!
Reason 3- One Focus
I ended last reason with the sole purpose of these leaders of publicly traded companies is to make us money. The keyword is “US” there – as in the shareholders. You see, what I am about to say next may seem callous or harsh, but the truth hurts. These leaders don’t care about their employees really. They’ll do whatever it takes to increase that stock price. They will fire people, sell parts of the company, buy other companies, furlough individuals, freeze salaries, etc.
Why, you may ask? Because these executives have bosses too. They are the shareholders and we have the power. How safe is a CEO’s job whose stock price hasn’t moved in 2 years? Think you know the answer. They are paid very well, and tied to the stock price. They know they are only as good as their stock price, and last quarter’s valuations.
I hate the principal here, but if you are asking me to place my money somewhere, sadly, I’ll choose these cutthroat business leaders over a nonprofit any day.
Reason 4- Less Poverty
In 1990, roughly 2 billion people were living in this world in extreme poverty. Today there are roughly 500 million. Now that certainly isn’t anything to celebrate, I understand. That said, when you take the view of a publicly-traded company, we know a few things. They produce either goods or services.
With fewer people in the world in extreme poverty that bodes well for these dominant companies. They have a larger pool of people to afford their products. It is simple survival mode if you ask me. The company stays around and more people can utilize them.
Reason 5- More people
In the year 2000, there were roughly 6.1 billion people living on this planet. As of 2021 there are roughly 7.9 billion people! That is an astounding growth if you ask me. Better yet, if you are a company selling a good or service all you had to do was maintain your market share to flourish.
For instance, if you were Apple and knew 10% of the world population would own one of your products, you’d be quite happy right about now. No need for growth, just maintain your market share and you’d go from 610 million users to 790 million.
Next time you are thinking about how “risky” the stock market is I hope you are reminded of this article. You see the chips are simply stacked in these companies favor. Here is a quick run down in summary:
- Massive companies
- Run by brilliant people
- They only care about increasing stock price at any cost
- Selling to a population that has more money
- Substantially more people on this planet to utilize these companies
Hope this gives some much-needed perspective. If you ask me ride this proven investment for as long as you can.
As always stay wealthy, healthy, and happy.
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