The answer to the question above will come by answering two sub-questions:
- Why investing in stocks during a market downturn is guaranteed success?
- Why investing in stocks during market turmoil is better than other asset classes?
Let’s start with the first sub-question.
We must first start with what the stock market is. It’s a regulated market for buying & selling securities. This means you can own a piece of companies listed on the stock market, and have voting power consistent with the stake size you own.
Now that we know what the stock market is, we can see how during economic crises the market value of these companies might drop correspondingly. Usually, the bigger the crisis the bigger the fall in stock prices of these companies.
What’s important here is not to panic, which almost everyone does. I see this as an opportunity to buy, & in fact, I get excited when the market starts falling cause it’s a chance to enter the market with new capital.
In the end we’re investing in companies that provide goods & services, be it retail products, real estate, & whatnot. And while it’s possible for us to temporarily halt the consumption of these products & services during hard economic times, we never stop forever.
I want whoever is reading this article to imagine themselves never needing food or shelter or transportation again…it’s not possible. Crises pass by eventually & if you’re unsure about this statement then take a look at historical charts & indices. You’ll realize that we’ve gone through so many crises, & the stock market eventually regains its losses and then some.
Those who continue buying when the market is at low levels reap more gains than those who stay on the sidelines, too afraid to enter.
The second sub-question: Why are stocks better than other asset classes during these times?
Now that we’ve seen what the stock market can do, let’s take a look at other asset classes.
While there’s a certain trend to seek safer havens (less risky investments) during economic hardship, that may not be the best way to go.
That’s because lower-risk investment instruments will also likely offer lower returns, & those returns may not be enough to even break even with the damage that inflation will do to your purchasing power.
Therefore these other assets may not be as lucrative as they once were. Another important thing to note is that these other assets require a high level of understanding, experience, & “being in the market” for them.
So rather than investing directly in real estate, invest in a publicly-listed real estate company that already has the know-how. This same way of thinking should apply to other investment instruments.
What if you don’t have enough experience to invest in the stock market?
There are a ton of studies & educational materials readily available to learn from. You can check out books or the stock exchange’s official website. Thndr have a Learn platform with educational material.
But I’ll tell you about my favorite way of learning & investing in the stock market. It’s the Warren Buffet way, one of the best investors ever. That way is to simply invest in the companies you want to be a part of.
Rather than buying a stock in a company & just observing its price increase/decrease, invest in the stock of a company you like & are comfortable with during both the good & the bad times.
I’ll end the article here, & I hope I was able to answer the question asked above, & I wish you all a great investing journey.
* This article was not written by Thndr and is not considered investment advice. You should do your own research before making investment decisions.
