I often get asked, ‘Should I invest in the share market.‘
What I believe is: Yes everyone should invest in the share market. Everyone plays their own crucial role in helping build our ever-greater society, so everyone should make the most of it by investing in and sharing in the proceeds of our societies prosperity. ‘Don’t just work the farm, own a part of the farm.’
However, I also believe the how, why and when of if an individual should invest in the share market is much more complicated.
So, In response to, ‘Should I invest in the share market.‘ I tend to ask a lot of questions:
What do you want?
What do you want out of life? What are your goals? What are your priorities? How do you want to spend your days? How much money do you need in the short term? How much do you need over the long term?
First you need to have answers to these questions in mind.
Why do you want to Invest in the Share Market?
To make short term money.
Share market investing is like any other craft or trade – you will only get out, what you put in. It takes time and experience to get good enough to beat the market over the long-term. If you are disciplined, wise and patient you will make money in the share market, but it won’t be overnight.
If you are looking to increase your current earning capacity you may be better off investing your time and resources in yourself, your career or your business rather than in the share market.
If to ‘make short term money’ is your answer you probably shouldn’t try investing in the share market.
To grow long term wealth.
Share markets around the world give you the opportunity to buy your very own slice of a company. Whilst you sleep your companies are still working for you and they never stop. The more you invest, the higher your percentage ownership of a company and the higher your percentage entitlement of the profits. Your investments continually compound over the years and can turn your hard-earned savings into long-term sustainable wealth.
If to ‘grow long term wealth’ is your answer you probably should invest in the share market. You just need to decide how.
Are you Actually Interested in Investing?
Yes, I like to read plus I find business, numbers, psychology and how the world works fascinating.
I’m a strong believer that people should devote as much time as is possible and enjoyable to that which they love. We are simply better at and more patient with preoccupations that hold our attention and draw us further inward, even when things get harder.
If you think you may feel this way about investing, it may be worth having a go at personally managing your own.
No, I don’t like to read plus I find business, numbers, psychology and how the world works pretty boring.
Managing your own investments is definitely not for everyone. There is a lot of reading involved, a lot of excel spreadsheeting, it is a fairly individual endeavour and it can be a lot like watching grass grow if you aren’t into it.
If you think you may feel this way about investing, it’s probably better off letting a low-cost index fund or a professional manage your investments.
What Investment Returns are you Expecting?
6 – 10% average annual compounding rate of return.
If you wanted to manage your own investments and were happy with 6 – 10% I think this is a very manageable goal for a private investor.
If you wanted a professional to manage your investments and were happy with a 6 – 10% return I would set-up an automated weekly / fortnightly / monthly investment into a low-cost index fund/s. I write more about the why and how of this here – How I would invest my cash if I wasn’t a share market investor
10 – 15% average annual compounding rate of return.
If you wanted to manage your own investments and were aiming for 10 – 15% I think this is an achievable goal for a disciplined, well researched, wise and patient private investor.
If you wanted a professional to manage your investments and were aiming for a 10 – 15% return I would look to invest with a professional that had a strong historical record, that you trusted and came well recommended from a handful of sources. If I didn’t manage my own investments I would trust my investments with Forager Funds Management.
Note: I’m not commissioned in anyway to say this, I have just followed them for many years, agree with their style and believe they can achieve 10 – 15%+ over the long term.
15% + average annual compounding rate of return.
If you wanted to manage your own investments and were aiming for over 15% I think this is an achievable goal for a very disciplined, very well researched, very wise, very patient and very dedicated private investor.
There are very few large funds that can beat 15% over the long-term. But, if you wanted a professional to manage your investments and were aiming for over 15% I would look to invest with a professional that had a very strong historical record, that you trusted and came very well recommended from a handful of sources. Again, If I didn’t manage my own investments I would trust my investments with Forager Funds Management.
I believe investing is for everyone.
But not necessarily direct investing. Many people are better off, both for their own happiness and their financial freedom, to leave investing up to a low-cost index fund or a trusted manager.
And I never believe investing is a good way to try and make quick cash.
Enjoy the ride!