Since the end of March 2020, when the coronavirus began, the net worth of all Americans has risen from $110 trillion to $137 trillion. (For reference, $1 trillion means $1,000 billion and $1 billion means $1,000 million). Net worth refers to the assets remaining after deducting all debts, such as home loans, credit cards, student loans, and car loans, from houses, stocks, bonds, cars, and cash.
Financial assets make up a large portion of net assets. A financial asset can be said to be an asset that is invested in the stock market. However, the richest 10% own 85% of the stock market. This means that most of the benefits of astronomical asset growth went to those who invested in the stock market. Half of the US population, or 50%, has little or no money invested in the stock market. This is one of the reasons why the rich keep getting rich and the poor keep getting out of poverty.
From 2009 to 2021 after the financial crisis, the stock market has averaged over 15% per year. If the principal invested was $10,000, it has multiplied 5 times to more than $50,000. In 13 years, the stock market has experienced 12 years of ups and downs, and it is the 10th year that double-digit numbers have risen. Of course, the stock market didn’t just go up and down. It has experienced declines of more than 10% seven times in 13 years. For reference, Nasnak, made up of technology stocks, is growing at an average annual rate of 23%.
They say that the stock market has been rising for a long time and will someday fall. It’s not wrong. But it doesn’t serve any real benefit at all. Those who consistently invest without anticipating the stock market’s movements receive a high return, but those who do not invest with their heads (?) do not receive any benefit.
I don’t invest because I’m afraid of a stock market crash, and my savings or savings don’t grow. Rather, the value of money continues to decline as prices rise. One of the biggest reasons people don’t invest is fear of a stock market crash. All media and stock experts (?) constantly explain the stock market crash and why. This is because all investors who want to avoid the crash are the topic of interest.
There are always things to be concerned about at that point in time in stock market investing. However, in the 20th century, there were two World Wars, the Korean War, and more than a dozen recessions, oil shocks, etc., but the Dow Jones rose from 66 to 11,497. Despite experiencing the financial crisis, the US credit rating downgrade, the UK leaving the European Union, and the current corona virus, the stock market has experienced peaks 70 times this year alone, rising to a yield of 27% and over 36,000.
The rich are optimistic about the future and invest in a difficult situation such as a pandemic as a good opportunity. Poor people don’t have much money to invest, but they don’t invest because of anxiety and pessimism about the future.
The US stock market has averaged 10% per year since 1926. A return of 10% means that the money invested doubles every 7.2 years. An investment of $100,000 is a remarkable return that increases to $200,000 in 7.2 years, $400,000 in 7.2 years, and $800,000 in 7.2 years, that is, 22 years later. While we cannot accurately predict future stock market returns, our long history gives us a baseline. It is a fact that the return on stock investment over a long period of time has clearly been higher than inflation. For this reason, the necessity of investment has been emphasized.
The world is cluttered with coronavirus. It is no exaggeration to say that our daily life starts with Corona and ends with Corona. But crisis is an opportunity. Explain why the rich continue to get rich and the poor keep out of poverty (A Rising Market Doesn’t Enrich Everyone, WSJ, March 9, 2017).
Investing properly is not investing in the present, but investing in the future. As we start the new year 2022, we hope that we can all become millionaires by informing our readers and loved ones of the need for investment.
1/3/2022
Myung-Duk Lee, Ph.D., Registered Investment Adviser (RIA)
248-974-4212
Copyrighted, Dr. Myung-Duk Lee’s Financial Column All rights reserved.
