So, you want to get rich. Surprise, surprise. The question is how do you get there.
How much are you willing to gamble on your retirement? Everything? Half of everything? How lucky do you feel putting your children’s college funds at risk? Come on now. Be honest.
How do you get rich? How do you get to retire in a manner to which you want to become accustomed? How can you afford to send all of your kids to Harvard? The government has the answer. Gamble.
Those on Wall Street and others prefer the word invest. Sometimes you hear someone called a speculator. Let’s call a turd a turd. It’s gambling. The stock market has nothing to do with the real world. When Amazon was about 4 years old its market capitalization (cost of a share times the number of shares) was 7 times that of Sears and Roebuck. At the time Amazon had never had a profit. None of their financial projections showed any expectation of profit in the foreseeable future.
Amazon was viable enough to survive the bursting of the dot.com bubble but presently isn’t flying quite as high. Speaking of Sears, remember that Kmart comes out of bankruptcy and almost immediately purchases Sears. Let me know if any of that makes enough sense to warrant throwing your money at it.
What drives prices up in the stock market? There are a few things. Chief among these factors is speculation, gambling. Another factor is too much money chasing a limited number of shares.
The government wants you to gamble away your savings. That’s why they give gambling tax breaks that actually working for a living doesn’t qualify for. The lobbyists want more money in the market to push the prices ever upward.
What ever they call it, playing the stock market is gambling. Is the possibility of getting rich worth it? Even putting your money into mutual funds may find your money being put into a ponzi scheme. Recent events should be an object lesson: the professionals, the Masters of the Universe only pretend to know what they are doing. Can you make better guesses? Maybe. Maybe not.
Let me offer an alternative. It will not put you in a position to challenge Warren Buffet. It will, however, provide a great deal of security for your old age. Invest in the United States. Buy Treasury bonds. The only safer bet is to die early.
If the government would eliminate the tax breaks for gambling it could make Treasury bonds tax free. Municipal bonds are tax-free. Why not Treasuries? You don’t even need to pay a broker’s fee.
This could reduce, possibly eliminate, the need for the government to go hat in hand to the Saudis and Chinese. The interest payments would stay in the country. That would help a little on our balance of payments. It would reduce the possibility that foreign governments could use our debt to pressure our government.
To be corny, it would be patriotic to invest in our country. It’s certainly more patriotic than Bush’s suggestion of going shopping. It’s even more patriotic than a bumper sticker.
Nothing would keep you out of gambling in the market – except prudence. Put enough in Treasuries to ensure your retirement, your kids’ education, whatever. If you have money left over, money that you can afford to lose, have at it. Bet against the house. Play the market. You might hit the jackpot. You might hit the lottery. The odds aren’t that different.
If you are intent on gambling some or all of your money, wise, careful direct investment in a local business, your own or someone else’s, might prove more prudent. It might also create a job or two. Buying stock from another speculator doesn’t do that much to increase employment. Keep your investment close, where you can keep an eye on it. It does require some effort, some work. Oh, I said it. I said the terrible word that gamblers are so averse to.
The United States became the economic engine of the world way back when work was not a dirty word. Now it is. Look at the front page to see the difference.
It’s nice to dream about being rich but, regardless of your broker’s promises, not everyone can be rich. Live with it.
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I was aware of this previously, but nevertheless there was clearly several useful bits which finalized the picture for me personally, thank you so much!
When my daughter was first faced with deciding whether to enroll in a 401k plan, she asked me how the stock market worked. My explanation to her was pretty close to your description, here.
I encouraged her to enroll in a 401k, but be sensible in choosing her investment options.
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