Why Staying Out Of The Stock Market Is Just Plain Crazy

Posted On April 12, 2017 8:51 pm

Understandably the 2008-2009 financial crisis, and the 50% stock market crash that went with it, soured a lot of people on investing. In fact, just 1/3 of Millenials, the generation most harmed by the crash, are currently invested in the stock market. Now part of this has to do with this generation’s weakened earnings power, and high student debt load. However, it’s also true that many Millenials, like all too many Americans consider investing nothing more than a dangerous form of gambling; one in which the game is rigged against them.

However, not just has history shown this to be absoluely false, (long-term investing is the best, and for many, the only way to achieve a prosperous retirement and financial independence), but it also doesn’t make sense, even if you cynically believe that corporations run the world for their benefit.

After all, whether believe that the future is a New Zealand style Star Trek utopia, (which I do), or a dystopic corporate dictatorship, the best path you can take is to save as much as possible, and dollar cost average into a quality, diversified dividend growth portfolio. Think of it like this. If society manages to figure out its current problems, those of rising inquality, economic insecurity, and rapidly advancing AI and automation, then the world will be far richer in the coming century. That in turn will mean far higher corporate profits, which leads to generous, secure, and exponentially growing dividends.

On the other hand if we descend into a corporate controlled world run by a handful of plutocrats (which I’m optimistic won’t happen), then corporate profits, and dividends will also rise.

Either way, steady dividend growth investing is your best bet to live an increasingly propserous life over time. Because no matter how the future turns out, dividend investing ensures that you will be part of the true ownership society; quarterly recieving your cut of that filthy, filthy corporate lucre.

And don’t forget that if you can live beneath your means for long enough, and save enough of your income, than you too can also become a plutocrat. For example, take a look at how a diversified 5% portfolio (with 10% dividend growth) can do over the years and decades.

Investing $1,000 per month becomes

In 30 years: $5,999,482 paying $299,974.10 in annual dividends (dividends alone put you in the top 7.53% of income earners at age 55)
In 40 years: $24,551,446 paying $1,227,572.30 in dividends (top 0.65% of income earners aged 65 based on dividends alone)
In 50 years: $99,604,483 paying $4,980,224.15 in dividends (top 0.03% of income earners aged 75 from only dividends)

Investing $2,500 per month becomes

In 30 years: $14,998,707 paying $749,935.35 in annual dividends (top 2.03% of income earners aged 55)
In 40 years: $61,378,615 paying $3,068,930.75 in dividends (top 0.4% of income earners aged 65)
In 50 years: $249,011,212 paying $12,450,560.60 in dividends (better than top 0.01% of income earners aged 75)
In 60 years: $1 billion paying $50 million in dividends

Investing $5,000 per month becomes

In 30 years: $29,997,415 paying $1,499,870.75 in annual dividends (top 0.51% of income earners aged 55)
In 40 years: $122,757,231 paying $6,137,861.55 in dividends (top 0.01% of income earners aged 65)
In 50 years: $498,022,423 paying $24,901,121.15 in dividends (better than top 0.01% of income earners)
In 60 years: $2 billion paying $100 million in dividends
In 70 years: $8 billion paying $400 million in dividends 

Notice how, given a high enough savings rate, and enough time, almost anyone can become a billionaire. Now obviously this is easier said than done, otherwise we’d be overrun by them.

That’s because this kind of incredible exponential wealth compounding requires three things that most people don’t have: discipline, frugality, and emotional control.

That last part, control over your emotions, specifically to “be greedy when others are fearful”, and hold on during gutwrenching 30% to 50% market crashes, is the reason that most people underperform, and why so few people are able to truly maximize their long-term wealth.

However, that’s what this site is for, to try to help as many people as possible to maximize their life happiness, by putting them on the road to financial independence. Hopefully, what you read on this site, both my own work, and the work of others I find illuminating, can help you eventually join the ranks of the plutocrats;)


About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I currently write for both Seeking Alpha, Simply Safe Dividends, and DividendSensei.com My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams, and enrich their lives. With 22 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams. I'm currently on an epic quest to build a broadly diversified, high-quality, high-yield dividend growth portfolio that: 1. Pays a 5% yield 2. Offers 7% annual dividend growth 3. Pays dividends AT LEAST on a weekly, but preferably, daily basis