Is the stock market like gambling?

The financial planning industry will tell you it’s just too hard, too risky, and too stressful to learn about the stock market on your own. When I ask women why they don’t invest, I hear things like…

“I don’t know where to start”
or 
“I’m afraid to lose my money”

But… the truth is that the stock market is made up of thousands of companies and has survived depressions, elections, crashes, natural disasters, wars, and yes… even pandemics.

It’s not going to zero.

If you tuck your money away into a high interest savings account, you’ll be LUCKY if you get a 2% return.
The average return of the stock market, over it’s ENTIRE HISTORY (even through all those disasters) is almost 10%.

So really, one of the FIRST investment mistakes you can make is to NOT invest. 

(BY THE WAY… Many recent studies prove that women are better investors than men. Go on, Google it.)

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When people tell stories about the friend of a friend that they know who LOST ALL their family’s savings in the stock market, what they SHOULD be saying is “I know someone who didn’t do their research and made the mistake of putting all their money into one single company that ended up going bankrupt!”

Experts often recommend BALANCE when talking about money. Yes, pay off debt, but make sure that you have an emergency fund and some fun money at the same time. Want to be a home owner? Great. Invest in your home, but have some liquid assets too. Don’t keep all your money in that one spot under your mattress. If there’s a fire, it’s all gone. The same goes for investments. If you put all your money on stocks in one company, it’s riskier.

So, HOW do you make sure your money is balanced out when investing in the stock market? One way is ETF’s. (Exchange Traded Funds)

An ETF is an investment fund that lets you buy a large basket of individual stocks or government and corporate bonds in one purchase. Think of ETF’s as the gift basket, and all the contents are stocks or bonds from different companies that have the same objective.

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Many ETF’s offer investments in groups of companies that operate under certain values, like being environmentally friendly, or offer to exclude companies that sell things like tobacco and firearms, if you wish. You can invest in ETF’s that are primarily made up of international equity, so that if the Canadian economy isn’t doing well, you’ve got your eggs in another basket. 
If you’ve talked to a banker about investments, chances are you have heard of mutual funds… (or you may even own some yourself!) 

Mutual funds are another way to buy many stocks/bonds at one time, except they’re taken care of by mutual fund managers who actively move your money around based on their predictions of which stocks will go up or down. 

The average mutual fund fee in Canada is 2.35% annually. The average ETF is 0.2%.

The funny thing is…

96% of mutual fund managers FAIL to outperform the market… and most of them don’t even offer financial PLANNING or teaching. (which means if you invest in an ETF all by yourself, stats prove you’re likely get the SAME results WITHOUT the middle-man taking his fees off your return.) 

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Don’t get me wrong. I’m not saying mutual funds are BAD. I’m just saying that you should figure out what you’re paying versus what you’re getting. Just because you’re paying more doesn’t mean you’re getting a better return on your investment. 

I FIRMLY believe that every person should be able to evaluate the performance of their investments themselves… and have a basic understanding of how to invest wisely. That’s why this month in the Pretty Money Club we are dissecting our members investment accounts and comparing each type.
One size really doesn’t fit all… especially when it comes to your money. 

If you want to dive into a basic understanding of your investment options, check out my e-book called “Simple Talk About Stocks.”  In fact, I’ll give ya a coupon code just for reading this blog post!

INVEST20

Click here to see what the book is all about – and remember to use coupon code “INVEST20” 

Published by theprettymoneyblog

To all you women that are working too damn hard to feel like you’re just getting by paycheque to paycheque… To all you ladies that just don’t have the freaking time for financial jargon and complicated budget systems… ​To all you women struggling to feel in control of your money, ’cause you know you can rock it if you just had a simple map… I see you. I GET you. I'm a busy mom of two boys and a wife to my business partner. I love baseball, red wine, and our family trip to Mexico every year. After more than a decade as a licensed professional in the personal finance industry, I’ve figured out strategies that are simple, but have massive impact on your wallet. I’ve left out the jargon and fine print because I know you don't have time for that. The Pretty Money Club enrolls new members twice a year for the 8 week course that will turn your ugly budget into top model pretty money... and most of our members stay in the club after class is done to keep learning and stay in touch with all the women they built community with.

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