This article was written by Ryan Teo and first appeared on fundMyLife, the platform that connects financial planning questions to the right advisers.
“Investing in the stock market is just like gambling.”
Or so the saying goes. And people develop a fear of investing from thinking that way.
It depends on our perception on how we think about it.
The problem is that a lot of people do treat the stock market like a casino, hoping to win the big bucks quickly.
Let Me Ask You A Question
Let’s say a friend who approaches you. He says:
“Eh bro! I’m opening a cafe that’s based on the latest dessert trend from Tokyo. It’s huge in Japan. Guarantee make a lot of money one la. If you interested, you can invest $10,000 in my business.”
What will you do? Are you going to hand over the cash to him just like that? I’m sure you will expect some sort of return of investment and do some research on your own.
So you will probably ask questions such as:
- What are your costs/expenses?
- What are the type of food will you be serving?
- What are the profit margins?
- When will the business be projected to break even?
- What are your staff costs? And so on.
Now, the question is whether you would do the same when you invest in the stock market.
Why don’t we ask ourselves these same questions when we invest? Do you research on the business fundamentals? Most people don’t. They just take the word of friends or analysts and follow the latest stock tips.
One of the most common misconceptions is that when the share price of a company falls, it means that the business is failing.
For example, if the price of Singtel shares starts to drop every day, it doesn’t mean that a couple of shops is closing down every day.
On the contrary, it offers us the opportunity to invest or to buy a part of the business at a cheaper price. Hopefully, you can be a part of the company’s long-term goal.
Investing Isn’t Optional
The truth is that many people haven’t made peace with the fact that investing isn’t optional. In life, there are only two main types of income. One is from your work or business; the other is from your investments.
If you only have money from working ONE job or have ONE business, you only have ONE income stream.
When I ask others why they were not investing, the one reason that keeps repeating is fear. With the rising cost of living in Singapore, having only one stream of income is also taking a huge gamble. However, think about it this way – the wealthiest people in the world got rich by building successful businesses.
As such, people can either start a business themselves which carries a lot of risks in itself and maybe capital, or they can be a partners of a business.
Essentially, that’s what the stock market offers us – the opportunity to partially own a business.
Sure you’ve heard the saying before “Don’t put all your eggs in one basket.” So, why then do we stubbornly accept a single source of income?
Isn’t that more of a gamble?
If you have any questions to ask me, I’m happy to answer them over at fundMyLife!
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