Stock Market – The Best Place to Start Investing?

If you really want to build your wealth, the stock market is the best place to start your investment journey.

When you buy stocks, you are buying ownership in a business, and businesses grow faster than any other asset. They grow faster than real estate or commodities or bonds in the long run.

In the last 40 years, if you had invested $10,000 into the stock market, it would have grown to $277,000, compared to US homes that would have grown to $58,000.

The stock market outperformed real estate by more than 4.6 times.

When you buy bonds, you are essentially lending money to companies or government. When you buy a stock, you are the owner of the business.

In the last 10 years, the stock market (S&P 500) was written at 12.04%p.a compared to corporate bonds that have written 6.72%p.a.

Hence stocks are the best builders of wealth in the long run.

If you are still not convinced, here’s another scenario:

Let’s take an average salary of $60,000 per year, and let’s assume that you save 10% of your income ($6,000) and you take this money to invest in different assets with a starting capital of $10,000.

How much money would you have after 20 years?

Nothing: 0% returns, $130,000

Time Deposit: 2% returns, $160,644

Corporate Bonds: 5%-6% returns, $225,929

Now, the difference comes when you invest in the stock market.

Index ETF: 10%-12% returns, $465,840

But, the biggest difference comes when you know how to pick the best companies using Value Momentum Investing™  (VMI), buying the best companies when they are undervalued and when they’ve got momentum.

Value Momentum Companies: 25% returns, $2,900,000

In this scenario, we are investing the same amount of money each year, but why is the result so different?

This is the power of compound return!

Compounding allows a small amount of money to grow to a huge amount of money over time.

If you want to grow your wealth, you cannot just focus on how much you save. You have to also focus on getting the highest possible return on your portfolio.

Let’s take a look at some real examples:

Index ETF S&P 500 ETF (SPY)

This is a fund and ETF that tracks the S&P 500. It is a basket of the biggest companies in the US.

You can see that in the last 10 years, investing in this ETF would have return you about 12%p.a on average.

This method is called passive investing. You don’t do anything to it, you just buy and hold it for the long run without much effort.

This results in approximately 200% in 10 years.

Let’s compare it to Apple (APPL) – a Value Momentum Stock

One good example of a company that is high quality, has good value, and momentum is Apple (APPL).

If you had invested in Apple 10 years ago, the price is at $12.

Today, Apple is selling at $220 per share. That results in  1700% returns in 10 years! Equivalent to 33.75%p.a compounded.

The example between these 2 charts goes to show you that when you know how to pick the right companies and know when to get in, you can get returns much higher than just buying the ETF and holding for the long run.

If there’s anything I want you to take away from this post, it is that it is possible to enjoy 10-12% returns annually if you buy ETFs and hold onto them for the next 30 years from doing basically nothing and this is why the stock market is the best place to start your investment journey.

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