Are equities for everyone?
Investing is one of the best ways for anyone to create wealth and become financially independent. What is Investing? Investing is buying things that could increase in value, like stocks, commodities, or property. While investing in the stock market involves risk, including the risk of permanently losing money, a disciplined strategy of investing small amounts over long periods will eventually result in a considerable nest egg for most.
If a person invested $1000 in a stock in year one and the stock price appreciated 6% a year, the investment would be worth over $10,000 in 40 years. Now, If the person contributes $1000 each year, it would be worth nearly $150,000 in 40 years at 6% return. If a person can afford contributing $500 per month, then at 6% return the investment would be worth nearly $1,000,000 after 40 years. That is the power of compounding and it can happen with investing in the stock market. I analyzed all the 40-year periods from 1928 through 2014, and found that the 40-year return has been higher than 6% over 70% of the time.
One comment that invariably comes up is that most Americans are living pay check to pay check and have no money to save and invest. A 2008 study by the Commission on Thrift found that American households with incomes below $12,400 actually spend an average of $645 each year on lottery tickets. Saving that money, rather than wasting it on Mega Millions/Powerball, means a family could accumulate almost $100,000 in 40 years! Imagine if that were the trend, what a big impact it would have on families. However, humans are not rational beings, they make short-term decisions without long-term consequences in mind.
Building wealth by investing in stocks has been a reliable and accessible way for ordinary people, despite that the number of Americans doing so is shrinking. At AlphaStreet we want to change that mindset, we want to make saving and investing simple, easy and social. We want it to be fun and exciting for ordinary people.
— Vishnu Beri, CEO at AlphaStreet, Inc.
