By: Dividend Sensei
My ex-wife and her family believed that the stock was no different from a casino. Specifically one that is rigged against the regular investor. This meant that even if you might be up in the short-term, eventually “the big boys” would take all your money. This is one of the biggest excuses they had for not saving or investing for the future. In their eyes if anything you put in the market is going to eventually disappear, then you may as well spend it now and enjoy it.
This belief is probably shared by many, which is why, according to the Federal Reserve, only 18.7% of Americans directly own stocks. If you include those who participate in retirement plans, such as IRAs or 401ks, that number is 49%. Or to put another way half of all Americans are not participating in the greatest wealth creation engine of all time. Given that since 1871 the S&P 500 has increased 19,756 fold (adjusted for inflation), that’s a tragedy.
But one that is understandable. After all in the last 17 years we’ve seen not one, but two 50% to 55% market crashes, and could be headed for a third relatively soon. So let me very clearly explain the difference between long-term investing and gambling.