When I invest in the stock market, it is because I am optimistic about the long term growth potential of the global economy.
This allows companies to earn a higher profit and for their stock prices to go up over the long term.
And this is what makes investing different from going to the casino.
In the game of blackjack, casinos have a 0.5% higher chance of winning compared to players. For you to win in a casino, you will need to be lucky.
Investing doesn’t require you to be lucky. In fact, you can achieve decent investment returns even if you may not know much about investing.
This is because you can ride on the idea that the global economy tends to grow over a longer time horizon, even as horrible things may happen from time to time.
In the last few decades alone, we have already gone through a global pandemic, a global financial crisis, and a war.
You would probably still remember how you had the end-of-the-world feeling when the spread of Covid led to lockdowns.
But we managed to get through that and the economy and stock market both recovered from the sharp initial decline.
It is no wonder that Warren Buffett once said this about buying the S&P 500 index:
“Keep buying it through thick and thin, and especially through thin.
The temptation when you see bad headlines in newspapers is to say, well, maybe I should skip a year or something.
Just keep buying. American business is going to do fine over time, so you know the investment universe is going to do very well.”
Take the next step
Unconvinced about why you should be optimistic? Read up on why markets trend up over a long term period.