What You Need to Remember When Investing in the Stock Market
Let’s talk about something that’s often misunderstood: the stock market. You might have heard some common beliefs about it, like expecting consistent gains of 5-7% each year, thinking it always grows in the long run, and hoping your money will keep multiplying over time. But here’s the thing: the reality is quite different, and I want to break it down for you in a friendly way.
To give you a clearer picture, let’s look at some data from YAHOO! Finance about the performance of the S&P 500 Index. Here are a few examples:
- From December 30, 2016, to December 29, 2017 (12 months), there was a gain of 19.4%.
- From December 29, 2017, to October 1, 2018 (9 months), there was a gain of 9.4%.
- From October 1, 2018, to December 24, 2018 (about 3 months), there was a drop of 19.6%.
- From January 1, 2015, to December 31, 2018 (4 years), the annual real rate of return was 5.04%.
- From December 31, 1999, to December 31, 2018 (19 years), the annual real rate of return was 2.85%.
These numbers show that the stock market can be quite unpredictable. It has its ups and downs, and it’s not a guaranteed path to constant growth. It’s important to have realistic expectations and be aware of the potential risks involved.
Anyone who starts down the road to becoming a trader eventually comes across the statistic that 90 per cent of traders fail to make money when trading the stock market. This statistic deems that over time 80 per cent lose, 10 per cent break even and 10 per cent make money consistently.
Keeping in mind the disappointing success rates many opt to use indexing instead.
Rather than risk losing your money in the stock market, it can be kept in a guaranteed zero loss general account that grows when the market grows but doesn’t doesn’t go below zero when the market drops.
If you are interested in growing your money without the risk of loss then consult a licensed insurance agent and find out how a Universal Life (IUL) Insurance agreement can really work to your advantage by avoiding the pitfalls of having your money invested in the stock market.
