Let me start by saying that I understand that you are afraid to invest in the stock market. I get it entirely, and I have been there before as well. You work so hard for your money, and you fear that investing in the stock market is too much risk to handle.
You wouldn’t be wrong for thinking that the stock market is risky. Everything we do in life has some inherent risk, from driving on the freeway to flying in an airplane. The way we continue to travel through risky situations is by mitigating risks.
I will gear this article towards the large segment of people who have never invested in the stock market and do not even know people who have invested. When I started investing, I had never heard of passive income, dividends, and electronic traded funds.
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With so much information floating out there, it can be challenging to navigate the truth. Plus, many people producing content also have an underlying motivation to sell you their investment products. I give all my content away for free. I also put it in a book format for avid readers. I have nothing to gain from teaching you to invest in the stock market, only your gratitude.
First, the most crucial part of investing will be your mindset. A few months ago, I wrote an article called “Build the Mindset of an Investor,” which talked about staying calm through hard times. I need to become even more profound today.
We need to build a “why” to invest so strong that it takes over your life. If you have watched the movie “Inception,” where the idea takes over the man and his life, this will be similar. Once you have a purpose of investing, it will overcome everything and assist you in making sound decisions.
Many of you are living paycheck-to-paycheck—I’ve been there. You may believe that only rich people invest in the stock market or that you don’t have all the information available. One of my rules is, “You do not invest in the stock market to become rich.”
Good Debt vs. Bad Debt
You see, the mindset of most people is to get rich by investing in the stock market. This lust can lead them to make bad choices because they are chasing substantial capital gains. I do not believe that we should invest in the stock market to become rich. The stock market is not a wealth generator. Some true wealth generators are business, real estate, and the military.
The idea is to become rich using your wealth generator and then invest those proceeds into the stock market. So this begs the topic question, “Why Do I Need to Invest in the Stock Market?” The answer is that you cannot allow your money to sit still. If you can grasp this concept, you will understand the importance of investing.
First, let’s talk about work and investing. If you decide to invest, you will be creating a “shadow” of yourself that begins to perform some of your work for you. The shadow also starts to get paid and contribute to the household and investments. Let’s name your shadow Billy.
Now, Billy the Shadow starts small, like a baby. When you begin investing in dividend-paying stocks (we invest for income), Billy will begin to bring in some cash per month. The more income you feed Billy, the bigger he becomes. Eventually, the goal is to get Billy to become big enough to pay for all your bills and living expenses. At this point, your child is a man and can provide for you and your family.
Do I Need Lots of Money to Start Investing?
Now, since Billy eats income, the more you feed him, the faster he grows. If you are working a job and providing him small amounts of income, he will grow slowly. That is why most people wait to retire until 65, even then Billy is not big enough to provide for them completely.
But what if Billy the Shadow had a sister who specializes in business and a brother who specializes in real estate? They would also help you feed Billy income. How long would it take for you three to feed Billy enough income to make him full grown? This teamwork is what we call diversifying our passive income.
Now, you have a family of four: You, Billy, sister business, and brother real estate. When you want to retire fully, you may only want to keep Billy around and let the others go off and get married to someone else. In essence, that is why we invest in the stock market.
The stock market, when fully funded, will allow us to have a completely passive lifestyle—no worrying about real estate, business, or a job. I envision myself keeping my companies and real estate, but the important thing is to have the choice.
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Ideally, you will want to start building up your investments (Billy) in your 20s, 30s, and 40s. Investing is best when combined with time because time allows the power of compounding to work its magic.
There are other reasons to invest, such as beating inflation, but those side reasons act more as an additional benefit. The main reason will be how you view your retirement lifestyle. If you want to be cooped up in a small house or apartment living off your $1,000/month social security check paid on the 3rd of the month, go ahead. Have at it.
My wife and I have seen this life play out multiple times as landlords. Many of the elderly tenants we had, lived extraordinary lives of wealth and adventure. Only they did not grow Billy, and now they live paycheck to paycheck.
They usually have money for about a week before being broke again. If that is the life you want to live, please go ahead. However, something tells me you are different from the large amount of Americans who live this way.
Now, you will need to reflect on how you view your future. Where do you see yourself and with whom? Let the answers guide you. Don’t’ worry about only investing $100-200/month. You will get there.
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Building passive income is one of the most addicting things you can do for yourself. It’ll start slowly, and then you will begin to see massive results. As your money compounds, your thirst for more passive income will compound as well.
Self-education compounds just as fast as your dividends. Your mind will start to connect the dots on specific ideas and courses of action. You will understand the concept of a wealth generator and the truth about discretionary income. You will know why saving money is bad, and how to invest your cash.
But you will need to start somewhere. Luckily, I have been documenting my journey and created an in-depth guide on how to start. “How We Plan to Retire on Dividends” is a great place to begin your journey and is also in book format.
I genuinely wish you well on your journey. Be someone who thinks on their own, exercises JOMO, and lives for today AND tomorrow. You will be surprised at how fast you can turn your circumstances around. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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