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Why the stock market is by far the best way to start you on your journey towards

By: Marcus de

Why the stock market is by far the best way to start you on your journey towards financial freedom The following article explains that out of the three most popular routes to wealth - property, business and the internet - it is the stock market which is the most accessible and best way of starting you on your journey towards financial freedom. In fact, the stock market has all the positives of property and business, with none of the negatives! 1. Property The route to wealth with property is to build a portfolio and sell itPeople like property, and land, because it is tangible – you can see and touch it – and it is considered solid. Especially in this country it has a great track record of making people serious wealth, notably for ordinary people who took action and were in the right place at the right time. Most people who have made serious money in residential property build a portfolio of many buy-to-let properties, collecting rents for years while waiting for the value of the properties to rise until one day they can sell the entire portfolio. Also, there are a lot of attractive international opportunities in countries such as France, Spain, Dubai, Cyprus and Bulgaria, to name but a few.  A lot of meetings and research time is involvedSounds great, but what is the reality? A lot of time researching is involved when buying a house – physically going to view as many houses as you can before making a decision, at times that suit many different people. Also other parties, like estate agents, mortgage brokers, surveyors, credit rating companies, your bank, etc. are involved.  And sometimes the deal doesn’t go through.  You have to spend a lot of money up-frontWhen buying a house, it is fair to say that you need to invest a fair amount of your own money up front. In addition, there are a lot of fees or ‘transaction costs’ involved with buying property, like estate agents fees, surveyors fees, legal fees, mortgage broker costs and stamp duty. And of course there is that new kitchen or renovating the bathroom, changing the carpet, curtains etc.  You have to work physically hard to maintain themI have a friend who has 45 houses in the Kent area. He is now a labourer because every time something goes wrong he has to fix it, costing either time or money.         The risks Risk 1 – rental income / mortgage rate fluctuationsRental income may have been the reason you bought the house in the first place. What if the rent doesn't cover all the costs? Who has to top it up with his/her own money? You do. What if something goes wrong or needs replacing? Who pays for the maintenance? You do. What if the mortgage rates increase – how will that affect you? Risk 2 – tenants The second risk is the tenants themselves – do they pay on time?; are they treating the house with respect? What if they decide to leave and you scramble around finding new tenants to pay the rent, because you still have to pay the mortgage? Risk 3 – property prices go downThe third risk is when property prices go down. You could find yourself in ‘negative equity’, where your mortgage is higher than the value of your house. Building a property portfolio can take a long time, especially if there is a recession during that period and house prices need to recover for a time. While there is nothing wrong with that in itself, we are looking for faster routes to wealth.   2. Setting up your own business The route to wealth for either a traditional or internet business is to build it up sufficiently to sell it for more than it is currently worth.That’s the real route here. If you can prove that the revenue streams you have built will continue in the foreseeable future, an investor will pay you much more than the company ‘is worth’ right now, including your brand and your reputation in the market. That is if you manage to survive the first 5 yearsThe reality though is very different. Official statistics tell us that 80% of new businesses fail in the first year. Nobody sees himself as being in that 80%. Fair enough. Of the remaining 20%, 80% fail in the first 5 years. Can you imagine working hard for 5 years only to see the business fail? I would rather fail quickly, so I can change my approach and start something more profitable. You have to spend a lot of money up-frontIt takes a lot of capital to start a business – particularly due to staff. Marketing, accountants, rent and general overhead costs of doing business all add up to impose quite a threat to the vital oxygen of any company, namely cash-flow.  You really need to know what you are doingFunnily enough, this is not so much the case in property or the stock market, but in business; if you don’t know what you are doing, no money will come in. Too many people start something because they are passionate about it – they create a product or service only to find out that there is no market for it.  It takes a lot of time20 years to succeed. When starting a business, people dream of overnight success. Most successful people though work 20 years before they are an ‘overnight success’. You have to work physically hard to grow itTo succeed in business, it is common knowledge that you need only work half a day, every day of the week, including week-ends – that’s 12 hours a day, in case you hadn’t realised it.  Risks Risk 1 – recessionThe first risk is if the economy starts falling into a recession and people stop buying your goods/services. Most companies do not have the money to keep themselves afloat. Risk 2 – competitionThe second risk is that competition will move into your area and take customers away. That is not good for business.  3. The Stock Market The route to wealth is to compound your moneyThe stock market is still largely misunderstood. It is only in the last 10 years that we have the type of information available about companies, charting software and online brokers that has allowed the average person a fair chance to make money, as much if not more than the professionals. Keep re-investing your profits – all of them – until you start to compound your money. This has been called the Eighth Wonder of the World by Albert Einstein, because it literally rockets your money exponentially into the stratosphere. Risks Risk 1: Lack of Knowledge. Most people don’t know what they are doing and throw large amounts of money at the stock market because they like the sound of a company. This can be a real problem, because without the right kind of knowledge, it can be much like gambling. Ensure you go on a good course, so you know what you are doing. Risk 2:  The market crashes through some world event. This assumes that you have bought, trying to go up, because with the stock market you can of course make money much faster when stocks go down  There have been several crashes, as in the property market or any other market for that matter, and the stock market always recovers over time. Not hampered by other peopleImagine this - no staff, no customers, no boss. That should be enough in itself - no staff expenses, training or aggravations; no customers to have to please, win over and retain and no colleagues or boss telling you what to do. Accessible to allRegardless of how old you are, whether you are male or female, regardless of your physical ability, anyone can do it. That is not the case with property or starting your own business. Surprisingly low starting capital required compared to property or businessThis is usually a surprise for people. While you have to spend thousands on property and thousands on a business, in the stock market you can start with about $2,000 or £1,200 - that's a lot less, isn’t it? And you don't even need that - you can start practising and improving your skills on a simulator / or virtual trader, where it is the same as the real thing: you enter and exit the trades, based on market prices, just like the real thing, but the money is not yours: it is virtual money. Also, there are no up-front fees (maybe for transferring money), but no legal fees, marketing fees, mortgage brokers, and if you are investing in US, which we suggest, then no stamp duty. Total time flexibilityThis really does depend on your lifestyle - there are daily strategies, weekly strategies, monthly strategies and yearly strategies. The trick is to choose one that fits into your lifestyle. Doing anything else means you won’t do it consistently well. Total location flexibilitySince all we need is the internet – you have total flexibility. You can be in any room in the house, in any house in the world, or be travelling. Minimal training requiredYou don't need an MBA or PhD to do this; you just need a good course to teach you the basics. Guaranteed to exist in the futureThey are not going to decide to cancel the stock market. No competitors – more the betterFirstly there are no competitors - you are not fighting against anyone else but yourself and remember: the more people buy the stock you are in, the better. Recession proof – you can make money faster when stocks go downDid you know more millionaires are made in a recession than at any other time? So if a stock, or a sector, industry or the entire market starts to go down, this is when you can make the most money fast. And get this – when the market goes sideways, when normally you think you can’t make any money, this is when you can make a lot of money in the stock market. No product/stock holdingYou don't need to purchase any inventory or have a garage full of stock. Low overheads, easy adminThe only overheads you have are your internet connection, your brokerage fees and if you have to pay for it, your charting software. That’s it! Don’t have to borrow moneyYou can if you want to, but you don’t have to, whereas this is usually the case in property and sometimes in businesNo meetingsThe biggest time wasters in the world, are needed for business and property, are not needed in the stock market No physical labourThere is no physical labour, unlike in property and some businesses, as there is nothing to build or maintain. You are in control at all timesThis surprises some people. Let's imagine you have a stock and you decide you want to get out. You click a button and 10 seconds later you are out. Can you do that with a property? In 10 minutes, days, weeks? Can you do that with your business? 10 minutes, days, weeks? Huge profit marginOne of the reasons is the small starting capital but also because you can buy something and sell it almost immediately when the stock goes in your direction (see above). Passive income: earn ££ sleepingThere are two reasons for this: the first is after-hours trading - the institutions trade when the market is closed to us mere mortals - the second is that you can sell options, which allows you to take advantage of time ticking - literally amazing! You can teach your childrenImagine learning this when you were much younger! We have graduates who get their children to do the filtering of stocks for them. It is like a game for children because looking at charts can be highly visual. Then the parents can come along and do the rest while the children play with other, less educational toys. Develops an Abundant Mentality fasterWith the stock-market you can measure whether you are doing well or not within a very short period of time. This way you can change your approach and correct any mistakes you are making much faster than you could in your business and certainly much faster than in property. The better you get, the more ££s you makeThis is incredible - can you imagine being in a job and your boss rewarding you everytime you get better?; and promoting you above him when you are better than him? In the stock market, this is the case – you can make more money, the better you get – and there is no ceiling. Have you ever practised a computer game and you became so good after practising for hours? So you can keep practising and getting better. That is precisely why you want to go on a virtual trader before committing your real money. The table below further seeks to summarise these points.