Investing in the stock market is a great way to make your capital yield almost automatically and without wasting too much time.
Many say they are not interested in the stock market in terms of speculation, but only as a long term investment buying the best stocks and keeping them for at least 5 years. They believe that only money is lost on the stock market and they know this or that friend who has gambled his fortune perhaps by investing in securities of dubious quality.
The result is that they simply don’t want to hear about the stock market. Are you among them too? If the answer is yes, then you are missing out on great opportunities. Because investing in the stock market is a great way to make your capital pay off almost automatically and without wasting too much time.
Investing in the stock market: what history tells us
Historically, the American market, which is the most efficient and on which there is the most historical information, yielded on average from 1945 to 2016 almost 9% real per year (i.e., net of inflation). What does this mean in practical terms? Simple, here are some examples.
A capital of 50,000 euros invested at this rate of return becomes, after 30 years, 663,000 euros. That has been the case recently of Tesla, Zoom,Microsoft, Facebook and BNHLF stocks.
Seeing what a result! This is the magic of compound interest. A concept that you must understand very well because it is the basis of a good financial education. Don’t have capital available? In this case, you can set aside a sum monthly or annually and the results will still be very good.
For example, if you invest € 5,000 every year for 30 years, you will have invested € 150,000 in the thirtieth year. But these sums, capitalized at 9%, in the thirtieth year will be 681,000 euros, that is 4.5 times the investment made. So, investing in the stock market is profitable and the sooner you start, the greater the results. Now, the objection is simple: “I don’t know which stocks to invest in. Not everyone earns 9% a year! ” This is true, but it is not a problem. In fact, the 9% return of the American market that I told you is the average return of the S & P 500 index.
The positive thing is that today we can all invest in this index (and hundreds of other indices) with simple instruments listed on the Milan Stock Exchange, ETFs.
So, there is no need to waste time selecting the best titles. You can do it all with one simple tool.
How to start investing in the stock market
Investing in the stock market is easy, but not very easy. There are several aspects to consider, some of which are psychological. The first important thing to know is that stocks fluctuate, often a lot, so if you don’t have strong nerves you need to define the right proportion of stocks and bonds.
For example, if you don’t want to see your capital lose more than 10% when things go wrong, I suggest you not invest more than 30% of your capital in the stock market. The remainder can be held in BTPs or other government bonds, or in a deposit account.
While that 30% will “work” to give you a good return, the less volatile bond portion will act as a “lung” and stabilize the overall portfolio performance.
The second important thing to consider is that you need to have a long-term time horizon. In the short term, stocks can fluctuate a lot, but in the long term, as we have seen, they do not fail to adequately reward patient investors.
So, in summary, investing in the stock market is very important to have a good passive growth of your capital over time. With the appropriate precautions, it is possible to limit the negatives and take only the best of this investment.