The entire reason I run this website and create content for Instagram is to teach basic finance skills to people that may not otherwise have a desire or place to learn them.
I’ve tried to cover the basics such as how to save money, all the way to the complicated topics such as the risks of investing in SPACs and penny stocks. I’ve even dabbled in timeless lessons gleaned from meditation to help new investors stay the course during a stock market downturn.
Therefore, you can imagine my frustration with the self-damaging conclusions many people are drawing from the GameStop saga dominating most news networks and social media sites right now:
“See? Investing in the stock market is just gambling! This proves it.”
“The odds always have been and always will be stacked against the little guy.”
“Hedge funds are around every corner and control the market. Or worse, an army of trolls on Reddit are behind every stock increase and they may change their mind tomorrow.”
“Rich people don’t want anyone else getting rich!”
I’ve heard and seen some variation of all of these statements from friends, family, and coworkers over the past couple weeks.
The facts about how this rise in the price of Gamestop is occurring are irrelevant (yet fascinating) to my broader point here. Not to mention the narrative changes each day as more is discovered and I’m no where near smart enough to understand all of the nuance (neither are most people talking about the topic, so be weary of news on it).
As much as I want to believe this is all about a modern day David vs. Goliath, and it is indeed a component, it’s becoming clear there are other factors at play. Factors about free speech, fraud, and the disappearing middle class.
I don’t know of a more debated topic than money. Everyone has it, uses it, and wants more of it, so everyone has an opinion on it. And you’ll rarely change someone’s opinion with a single fact or piece of advice.
The best I can hope for as a personal finance blogger is to lead by example, repeating the same proven methods over and over again, and debunking myths like a game of whack-a-mole.
That’s where the GameStop story starts to worry me. It’s like the grand-daddy of all moles to whack.
I’ll try anyways.
Investing in the stock market, when done correctly, is not the same thing as gambling.
The reason it’s so hard to convince most people of this is because there are a small number of people out there that use it in this way. And that’s okay. They are playing a different game and, therefore, following different rules. You don’t have to play that game to make money.
They may be young and have years to make up for a silly gamble that goes south. They may be following their friend’s advice. They may be a highly intelligent, highly successful day trader that knows more about markets than you or I ever will. They may be inexperienced and haven’t been burned bad enough yet.
They may have no kids or responsibilities, they may have lots of disposable income, or they may come from a wealthy family.
You can’t possibly know who they are, and because everyone is different, taking cues from them likely won’t work in your situation or help you meet your goals.
Unfortunately, herd mentality and sound bites steamroll right over all this nuance.
The fact is, there ARE safe and easy ways to invest and make money in the stock market. Ways where the odds ARE in your favor, not the bank’s, not the hedge fund’s, not the casino’s.
3 Low Risk Methods to Make Money in the Stock Market
1. You can use your 401(k) to invest 5-10% of your paycheck into a simple target-date fund through your company. Over enough time, this method can and will make you wealthy enough for retirement.
2. You can open up your own IRA (Roth or Traditional – it doesn’t matter). You can put $50 dollars a month or up to $500 a month into it and choose a low-cost index fund. An index fund is comprised of many different companies so you get a little piece of all of them for a low price.
This removes the risk of investing in any one specific company that may go bankrupt, like Gamestop.
3. You can research a bit of stock market history and realize that over time, the volatile ups and downs you hear about day-to-day turn into a reliable, upward line. That’s because businesses are rewarded for making products and services people will buy.
This gives them money to do it again and again and again in a feedback loop. The businesses may change, but the underlying goal never does. Businesses exist to make money. Investors are then rewarded for staying with them.
Here’s a brief history I made of the last 100 years of the stock market using emojis, headlines, and a graph of the Dow Jones Industrial Average. If you like this type of illustration, follow my Instagram account for daily content just like it!
At the end of the day, I hope this larger than life news story about GameStop doesn’t give people the wrong impression about how most people make money with investing. As entertaining and novel as it seems, it’s happened before and may happen again. The dust will never settle.
Ronald Read did it; everyone can do it.
Are there risks in investing? Of course there are. There’s risk in everything! There’s risk just getting in your car and going to the grocery store.
Invest and accept the risk of volatility or don’t invest and accept the risk of not having the freedom, time, or things you want in life.
It’s really that simple.