Stock Market and You

All around us we consume goods made, distributed, and marketed by companies. Yet when it comes to the words stock market we create a perplexity of this “machine” that is either too hard to understand or dictated by people too corrupt to trust. Based on the Great Recession of 2008 and documentaries such as Inside Job the perplexity is warranted. Yet in its simplicity the stock market is comprised of stocks where publicly held companies issue shares of stocks to raise money; you (investors) buy shares hoping to share in the company’s growth through rising stock prices. Anyone who owns a phone, drives/rides in a certain vehicle, or consumes certain organic smoothies is most likely contributing to the profits of these companies. Then the question becomes do you stay on the sideline or do you jump into the market of stocks and bonds?

Chances are if you’re working and contributing to a 401(k) or Thrift Savings Plan (TSP) you’re already investing in the stock market. It could be in the form of individual shares of stocks but more likely its mutual funds, which is a basket of investments-usually stocks, bonds, cash investments or a combination. By the way these are called defined contribution plans. Check with your human resource department if you’re not sure where the money coming out of your paycheck each pay period is going.

Others may not have defined contribution plans. So what do you do? You could do nothing, which is not a good idea! You could leave your money in a basic checking account, which is probably not a good idea if you already have a security savings. You could have friends/family convince you to invest in their next great idea, which is probably not a good idea without careful research. You could develop a shopping addiction and blow all your money, which is definitely not a good idea!

The stock market can help if you want a decent retirement by using the effect of compound interest.

Look at and into defined contribution plans like Roth IRAs, Roth 401(k)s, Traditional 401(k)s, and 403(b)s. It’s good to remember that its better to do something than do nothing or as it goes if you don’t act on life, life will act on you.