Investing is one of the most passive ways of income, at least when you invest long term. There are other kind of traders who buy and sell stocks within the same day, sometimes even just within a few minutes, who are definitely very active in what they do, but if you invest for the long run then the stock market is almost as passive as passive income can get.
It is up to you whether you want to make the stock market part of your passive income portfolio or not. I definitely recommend you do. If you know for sure you will never want to invest your money in the stock market then you don’t need to keep reading. However, if you believe the stock market might work for you at any point in life keep reading because in this article I’m going to tell you why you should start investing in the stock market today or never do.
With other ideas you might have to build or grow your passive income portfolio you can probably take some time and wait to for the right moment in order to jump in. You might be interested for instance in the affiliates market, but chose to wait until your current project takes off, until you finally quite your job or simply until you have time to better educate yourself in that field to give it a try. That is completely alright. Sure the market will evolve the longer you wait, the opportunities then might be different than the opportunities today, but they will still exist and you just need to make your you get up to speed with the current market situation when you decide to take the step.
The stock market isn’t built for that though… Investing in the stock market is a pretty secure long term bet, since the economy has been growing since the beginning of times and that is extremely unlikely to change. Sure it has its ups and downs, and that’s why the “long term” part of the equation is so important. Your stocks portfolio might lose money 3 years in a row, or it might give you an incredibly good return for 2 years in a row, but it is when you step out and look at your portfolio with a 10 years’ perspective or more that you can really see a steady growing trend.
The right moment to start investing is now
So really, if you wait any longer to invest in the stock market you are literally leaving money on the table… It doesn’t matter if you think the makerts are high or low at this particular point in time. Don’t speculate with how you might be able to buy more or less stock for your money if you buy now, tomorrow if you had bought yesterday, because remember, we are not pro traders, we just want to diversify our passive income portfolio, so here is how our line of thoughts tend to go.
If the markets are going up you will never buy because you will always think that today’s deal is worse than it would’ve been yesterday and you’ll say you’ll wait until things calm down and maybe even go down a little bit to make your move.
If you are wrong and the market doesn’t calm down and keep going up you will again say to yourself this is not the right time to buy because today’s deal is worse than it worse yesterday, and that you’ll buy when things calm down and go down a little bit. Because this is obviously a bubble, right?
But here is the funny thing. If you were indeed right and things calmed down and starting going down, you won’t buy either because you’ll think ok, if the trend is going down right now tomorrow I’ll be able to get more stock for my money, so I’ll wait until the trend goes back up and make my move then, that’s the smart thing to do.
But guess what. When the trend changes and start going up again you’ll be back to square one, thinking today’s deal is worse than you could’ve gotten yesterday and so on.
If you find yourself immerse in this infinite loop its ok, like I said we are not professional traders and you are probably not a pro in reading trends and financial reports the same way I’m not either. What you need to do is forget about your market hypothesis and start investing today! Because remember, you don’t really care what the market does in the next month, quarter or even in the next couple of years. You are investing long term.
Companies grow, or die
Think about it this way. Do you think Google will go under in the next 20 years? Do you think Coca-Cola will disappear in the next 20 years? Amazon? BMW? I personally believe all these companies will outlive us by many years, and if I’m right then their stock is very likely to be worth much more 20 years from now than its worth today. Why? For one, like I said before, the economy as a whole will keep growing year over year. But not only that, these companies are run by very smart people, people who are there to make sure their company stays relevant and is ready to fight the competition, that is when they can’t acquire the competition.
Whichever strategy they pick they all involve the company growing year after year. That’s the nature of business, either you keep constantly growing or somebody else will eventually take your place.
You could read full books about the concept of compound interests. To make a long story short compound interest is the ability to make money not only on your initial investment but also on the profits that your investments generates over time. So for instance if you invest 10K and after year one you’ve make $500 (5%) in dividends you can either chose to spend that profit or reinvest it, in which case if your return for year two is again 5% your net profit for that second year will be $525 instead of $500.
This might seem insignificant, but when you invest long term compound interest becomes exponential and a really powerful tool. Actually the power of compound interest is probably more important than the amount of your initial investment, but it does take time to reach that nice exponential part of the curve.
So to wrap things up. If you look at investment from a rational point of view there is literally no reason why you should wait a day longer in order to start building your portfolio.
Companies that are here to stay will keep growing consistently year over year, so if you wait any longer you are leaving money on the table.
The sooner you start investing the sooner you’ll start seeing the real power of compound interest and how they can exponentially grow your portfolio.
Last but not least. We are not professional traders, so stop speculating, looking for trends that don’t exist or waiting for event that will never happen. The only trend you care about is the long term trend of the economy, which being realistic isn’t going to stop growing during this lifetime, or the next!