Thinking about stock investing with a different perspective

So now you want to have the gold cup of possessing $1000 in liquid assets, unencumbered by any state enforced age of maturity, and you want it to be earning money for you – where do you start?
Well, before we get too deep in investing in commodities vs emerging market debt, let’s take a step back and ask “what result are we seeking from this investment?”
The problem with the stock market is that people look at it, and think it’s a mini-Vegas. We’re going to bet all our $1000 on one horse, we’re going to keep doubling down, and by the end of the year we’ll have the sacred million dollars!
WRONG!
This kind of success is possible, and it has been done, just like some people have won the lottery twice in the same year, but it is so unlikely that you’re better off letting it ride on black at the roulette table.
The appeal of the stock market is the ability to make a compounded return by owning something of value – namely actual ownership in the most profitable companies in the world. Its value is not in turning small sums of money into huge sums of money in short periods of time. The market takes time to show value, and it must be done in decades, not years.
A good year in the stock market would show a return of 10% – meaning a good year for your $1000 shows $100 in profits – not very exciting. In fact the government now is so jealous that you made $100 that they want their cut and you actually have to send 15% to the government leaving you with $85.
I can go shovel sidewalks for 4 hours and make $85 – why would I get excited about that return?
In reality you wouldn’t. The power of the stock market is not apparent with small dollars amounts; it only truly shows it’s power when you have a large sum of money. If you have $925,000 invested, and net the same 8.5% rate of return you’ve earned $78,000!!!! The goal for your $1000 is not to build it to $925,000, but to begin acquiring money in such a fashion that you will someday have the $925,000 and the confidence to keep it in the stock market because you’ve allowed it to accumulate for so long.
So to phrase it another way, the reason to invest in the stock market is not that it gets you a 10% return, but that the 10% return is valid no matter how much money you have! I feel like you really need to have an epiphany to understand this so I’ll say it another way. 10% doesn’t mean anything when you have $1000 because the real return of $85 doesn’t affect your life. 10% when you have $925,000 is a spectacular return because it plugs $70,000 into your life that genuinely affects your lifestyle. So invest in the market, not for the dollar amount it gives you today, but the dollar amount it will give you in the future.
Who do you know that’s saving $85 per year? Almost everyone.
Who do you know that’s saving $78,000 per year? Almost no one.
The goal is to begin investing so that when you do accumulate that sum of money, you have it invested in a vehicle that will show insanely large dollar amounts of profit – not percentages.

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