Why Are People So Skeptical of the Stock Market?

It's a place that can grow your money, make you wealthy and help you out for retirement, but some just shy away completely. I find out why.


Ah, the stock market. The roller coaster ride that has its ups and downs and is synonymous with large banks and the super wealthy. The stock market in my opinion is one of the best ways to grow wealth, but why is it that so many people only focus on the downs and not so much the ups? Why are people so skeptical about the stock market?


“I found out that that people my age, AKA millennials, and for people, like some of my family members, who are not exposed to the ideas of the market for any number of reasons, have this idea that cash is king and that they need access to it at a moment’s notice.”

How we currently view things


I’ve been told many times by people in my life that they would rather open a savings account and put money aside than invest into the stock market. When I retorted with “who the f*** gave you that stupid ass idea,” they continue to conveniently evade who or where they got the idea from and start spewing what their personal misconceptions are about investing. From all the responses I heard, I decided to start digging further into the topic. I found out that that people my age, AKA millennials, and for people, like some of my family members, who are not exposed to the ideas of the market for any number of reasons, have this idea that cash is king and that they need access to it at a moment’s notice. They believe the more they make, the more cash they save, and more cash equals more things they can buy, blah blah blah. There are a few issues with this.


Cash is only king in very specific scenarios and none of these people that presume cash is king ever use it in situations that are favorable to use cash. For example, why the hell are you financing your iPad or laptop. Just save up the money and pay cash. Or why are people buying cars with loans. Why does it make sense to buy a depreciating asset with borrowed money? Anyway, most often than not, cash is not king. If you continue to hoard up cash in a stupid ass savings account that pays you the average of 1-1.5%, you are losing your buying power every year due to inflation. Inflation is almost 2%-3% every year. See how dumb that is.


How we should be viewing things


The other thing I tend to hear often is something along the lines of “what if I lose money,” or “the stock market is all over the place and it can crash anytime”. The reason why people have this stigma is due to the financial crash that we, as millennials, had witnessed firsthand and the problems people around us may had to have deal with as an aftershock of the crash. Sure, I get it. I do. The 2008 crisis sucked a butt, but there are few things I need to remind everyone. First, stop looking at the market in short periods of time, that is not how we invest. We need to look at the market over a long period of time, which, if you ask me, is more than 10 years. If all you look at is S&P 500 index from Jan 2008 to Jan 2009 you will be taken back by what a violent drop it was.



But we see a completely different picture if we zoom out. Now if we look at the S&P 500 from Jan 2008 to Jan 2018, a span of 10 years, we see a violent pop up. Things look better now don’t they.



Second, we need to face a simple fact. Most of us are just not educated enough on investing wisely and the markets. And by default, what happens is, what we don’t know, we fear. But let’s take a look at things over time. The stock market historically has always trended upwards even with these “crashes” we have experienced along the way, such as the mortgage crash and before that the tech bubble in the early 2000’s. But to get a better understanding of what I mean, we will use the same S&P 500 index we have been talking about with a concrete example.


The example


Let’s say you invested $1000 in this fund in beginning of 2008, you’ve held onto it and never sold it even through the horrible crash which continued into the first quarter of 2009. Today that $1000 you held onto would net you close to $3000. Crazy right! You basically tripled your cash in 10 years’ time, even through this horrible event. Not bad for investing before the crash and waiting it out, am I right? And the result of this example would still hold true even if you invested way back in the 70’s, albeit now you’d have way more than $3000. If we can just educate people on how and where to invest their funds maybe, just maybe, we can remove this stigma people have and introduce more wealth to individuals. If you ask me, I feel like schools do a poor job of exposing students to this type of information but that’s a different topic for a different day.


"There are vehicles you can build into your investments to mitigate and even eliminate you from stacking huge losses, so the risk is almost zero if you really look at it."

Final points


Now I won’t get into how to invest in the stock market wisely in this post, I’ll save that for another time. My goal in this post is to bring awareness to the fact that we need to remove this fear of investing in the market and stop this thinking "we are going to lose money in the market because it’s all a game and we don’t know if we can play it like the Wall Street guys”. I’ll be the first to say it, I know a few people that have invested and lost a lot of money, but I can also say confidently they were stupid with their investments and thought they knew how to “beat the market”, or thought they knew how to get rich quick. In reality, it’s actually kind of hard to risk losing a lot of money in the market if you know how to protect yourself. There are vehicles you can build into your investments to mitigate and even eliminate you from stacking huge losses, so the risk is almost zero if you really look at it.


The key, again, is to be smart about it and just educate yourself about the topic. I’m sure once we can get people to realize that investing isn’t something out to get you or something that will definitely put you in financial ruin, we can finally make some serious money moves with our hard-earned money and grow for our future.


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