First, to clarify, I’m not saying that putting money in the stock market is gambling, but some people do believe that.
This post is not investing advice — it’s history I’ve learned over the years of saving for retirement. There are no affiliate links in this post, nor do I have any interest in the companies mentioned in this post, except for owning a few shares of some.
The Motley Fool, an investing website, published an article about a week ago entitled, “7 Hard-to-Believe Facts About Lotteries and Jackpots.” It’s excellent, and I highly recommend you read it, especially if you buy lottery tickets regularly. Spoiler alert: you may never buy another lottery ticket.
The stock market, with all of its disclaimers about “you might lose your money” (true) and similar warnings, is far from a perfect winner. However, with just a little homework, you can invest online and your likelihood of “winning” long-term are all but guaranteed (there are no guarantees in the stock market) when the market is viewed historically over the last 10-20 years and even beyond.
Did you know you can invest in the market at no (zero!) cost to you other than the money you’re investing? This is a change in recent years, as companies like Charles Schwab and many others have allowed investors to buy and sell stocks and mutual funds online with no fees.
And you don’t even have to buy whole shares of a stock. For example, I wanted to buy a share of Amazon. It closed yesterday at more than $3,400/share and that’s out of my budget. But Schwab (my online broker of choice, but others also do this) allows you to buy a “Slice” of a company if you want to invest but can’t afford a whole share. So, I bought a slice of Amazon and now I can say I’m an owner. More importantly, with the pandemic the value of Amazon stock has skyrocketed this year, so I can get in on that (better late than never) even though I don’t have a million dollars to invest (don’t I wish!).
Thanks to the magic of purchasing partial shares, you can get started in investing in the stock market for as little as $5.00. Imagine what your account would look like in a few years if each week you added to your stock ownership by purchasing more partial shares instead of lottery tickets! You’ll be way ahead of where you’d be if you keep buying lottery tickets. And you don’t have to leave home to do it.
Apple shares split yesterday after the market closed, 4:1. That means if you owned 100 shares of Apple, you now own 400 shares. The total value didn’t change — Apple shares closed Friday at approximately $500/share, and the new shares on Monday will open at about $125 each. So the total value is the same. But — and this is why Apple did it — the perception that more small investors like me can afford to invest in Apple stock creates a win/win situation — I end up with a good investment (Apple stock has grown dramatically again this year), and Apple will likely have many new investors come Monday.
With the advent of brokers offering fractional shares — “Slices” as Schwab calls them — stock splits may not be as significant as they used to be. But there’s still a perception that owning whole shares is more satisfying than partial shares. Interestingly, Tesla, which has also had an excellent year, is doing a 5:1 stock split this weekend for largely the same reasons as Apple. Tesla shares closed at more than $2,200 yesterday, and after the split will open at around $440/share on Monday, much more affordable. (Based on their stock price, they are now the most valuable car company in the world. Most of us didn’t see that coming, or we’d all be rich!)
Bottom line: if you care at all about your financial future, stop buying lottery tickets, and put the money somewhere where it will gain a lot more. If you’re not sure what stocks to buy, buy into a mutual fund through Schwab or another online broker. It may not grow quite as fast, but it will far outgrow putting all your money in a bank savings account where you’re probably earning less than 1% interest. You should have SOME money in a bank savings account where it’s readily available for emergencies, but start investing at the same time. All you need is that lottery ticket money!