A lot of the news we’ve shared over the past year or so has largely been about the ebbs and flows of the stock market as COVID-19 exploded in the United States and began altering life as we know it. We told you stocks to watch, detailed how the market rose with positive news about vaccines and Congressional stimulus talks, and also detailed how a Reddit user group helped increase the stock of Gamestop.
This post takes a little bit of a different approach to the stock market. Specifically, we’re going to focus on a recent study from Bankrate that gauged consumer favorability of the stock market and how many individuals see this type of investment as an ideal one. Let’s dig in:
About the Study
We’ve always held the position that investing in the stock market is an ideal arrow in your quiver that can help grow wealth and serve as an ideal part of a good long-term investment plan. However, a recent study from Bankrate that polled 2,500 people seems to show conflicting opinions on the value of the stock market. Here’s a look at some of the key findings:
- Nearly 40 percent of all American adults have no money invested in stocks.
- The two main reasons holding Americans back from investing in stocks are a lack of money to do it (56 percent) and a lack of understanding about the stock market in general (36 percent).
- About half of all the Bankrate respondents say they question the fairness of the stock market, calling it “rigged against individual investors,” however it’s worth noting that suspicions about its fairness were only cited by 13 percent of respondents as to why they don’t get involved.
Why the Stock Market is a Key to Long-Term Wealth Management
Many Americans seem to think that simply saving money will help them meet their long-term goals. And while a good savings strategy can certainly play an important role, most wealth experts say that savings is better for short-term goals. That’s why the stock market remains such an important part of any long-term investment strategy, as annual gains are typically much higher than any interest you’d earn from a savings account. Specifically, from 1965 through 2020, the S&P 500 produced annual gains of 10 percent on average. That’s a significant return on investment.
So what can Americans who are not — but want to invest — do to get started? First, know that it’s OK to start small — it’s just recommended that you start somewhere. And two, we also suggest that consumers take the time to truly understand the market and how it works. There are plenty of resources available today to help with this. Once people better understand how it works and how significant compound interest can be for any long-term wealth strategy, things should make much more sense. And finally, the stock market should be seen as a long-term strategy and not a short-term one. Having this understanding is important to realizing eventual goals.