Easy Money

How you treat your parents might be related to how well you think your life has turned out. Once you’re near the pinnacle of your life you’ll probably ponder how you arrived there. You’ll realize your dad was grooming you for success and deserves much of the credit or sometimes parents tried their best but it wasn’t quite good enough. Sometimes their best was pathetic and should have been illegal. If your parents were unsuccessful in life then you’re at a disadvantage.

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If I had a dad or mom who had an interest in the stock market it would have at least given me an edge. The most common Canadian investments in the stock market are Canadian banks due to the oligopolistic banking system and conservative regulations. Even as a considerably safe stock they generate good returns.

In 1995 an 18-year-old could have about $1000 worth of Royal Bank stock or they could have bought a sound system for their car that went boom…boom…boom. Look at me…boom…boom…boom. If one could have delayed gratification that $1000 could be in the area of $15,000 today…BOOM! One could and probably would entertain the idea that a stock can go to zero. The odds of someone stealing your boom box within 1 year at 3 AM is about 1000 times greater though.

If I was someone’s dad I would say to my kid, “hey butthead, you want to spend all of your money looking cool to your friends for 5 minutes or do you want an opportunity to laugh at them forever?” Even better, I’d get them started when they’re pre-teen and buy them shares of a company to get their interest. 10 years will go by and they’ll be like, holy shit! You can’t tell kids anything, you have to inspire them.

Above is a Toronto Dominion bank investment calculator. Just $1000 invested in 1973 with dividends reinvested would be $517,758 today. This beats investing in real estate on many fronts. You don’t have to mow your stock’s lawn or worry about your loser tenants plugging up the toilet.

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You do the math

 

If this stock chart could go back to the beginning the line would be touching your feet. Sure, past performance is not a guarantee of future returns but if I had to invest my money this option looks promising.

No one in my family embraced the stock market which is why it was never included in the family curriculum. They probably heard you could make money in the stock market but more importantly to them you could also lose money. Humans are very uncomfortable with anything that involves risk especially if there is any possibility in their mind of their money going to zero.

I’ve learned that sometimes it’s too risky to feel safe.

 

 

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The Stock Market

It’s common for people to think that you have to know something to make money in the stock market. If you don’t it feels as if you’re just throwing your money into a dark hole and hoping for the best. The stock market can be like believing in Jesus — one way to look at the overall stock market is that it will one day get you to heaven. You just have to believe.

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S&P 500 Index(500 of America’s largest publicly traded companies)

During the Great Depression, 1970s, tech bust and the Great Recession you may have questioned your faith but the market has always pulled through. The trajectory still appears to be heavenly.

Past performance is not a guarantee of future returns but what is certain is that if you were invested in the S&P 500 index anytime before 2018 you would be up on your investment. You can pick individual stocks for greater returns but then you might have to know something.

What will happen in the future is anyone’s guess but I think the most rational answer is that this chart in the long term will continue going up. If you don’t believe it will then you’re betting that America is soon going to shits and will never recover. From my experience the ones who believe the world is going to apocalypse mode are the ones who don’t like how their life has turned out. I know because I used to be one of them.

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It’s not all fun and games in the stock market. There can be periods of frustration such as the years between 2000 and 2013. If you had invested in the height of the year 2000 then you would have ridden a roller coaster just to be even in the year 2013. That sucks. If you had contributed to your investment all the way through though you would have made out just fine. Buying on dips is quite imperative.

This is not investment advice. I’m just presenting the facts. As far as history goes all that you had to know to make money in the stock market was to contribute regularly to an American index fund, have a long-term mindset and not panic sell.