3 Reasons to Get INTO the Stock Market Right Now

When the stock market has suffered a couple of really big slides in a row, like it did last week, the financial advice to those who are freaking out is always: Do not look at your account balances. The advice still stands not to change anything in your portfolio—trying to time the market is a fool’s errand.

In cryptocurrency there’s an acronym: BTD (Buy the Dip), meaning now is a good time to buy crypto—or for our purposes, stocks. Essentially, they are on clearance.

For the amateur investor, who relies solely on a 401(k), it’s bad news, but YOU can still make money in the stock market.

There are three characteristics about the stock market that make it such a great vehicle to build wealth:

  • Liquidity
  • Agility
  • Scalability

Stocks Are Liquid

When investing in stocks, you can choose how you want to get profits. The two primary approaches are to seek capital gains (selling our stocks at a higher price than we paid for them) and to generate cash flow (creating new money).

Seeking cash flow is the Rich Dad way because it allows you to control the situation better than just buying stocks, holding, and waiting for them to appreciate.

Either way, the stock market offers us the ability to easily buy and sell your paper assets. This is liquidity. Liquidity is the ease with which an asset can be converted to cash.

By comparison, right now there are many people who would love to sell their real estate. But there’s just one problem—it’s hard to sell because it’s hard for the general public to buy, with financing hard to get right now due to rising interest rates. And even if you can find a buyer it takes months to get the deal done. Real estate is notliquid.

Liquidity is important so you can always have a beneficial exit strategy. That’s one thing to love about the stock market. If one of your stocks begins to go down, the market allows you to set a stop loss at a certain number and sell it instantly before you have sustained a damaging loss. Or if you like the uptrend you’re seeing and don’t want to risk losing on gains, you can again sell as quick as the snap of your fingers.

Another advantage of liquidity is that a person doesn’t need to have tremendous sales and negotiation skills. Stocks allow you to make sales without being a salesman. That’s a huge advantage to a lot of people. Just click a button and… sold!

There’s some irony to the liquidity of the stock market, because very few people actually take advantage of it. Many investors hold the same stocks and mutual funds year in and year out, and never think about selling a good stock for a better one or using any kind of exit strategy to maximize their profits. There is also a little hypocrisy here on the part of the big institutions that tell you to buy and hold. Stocks only fall when there are more sellers than buyers. While you are holding, the large institutions are often the ones selling!

Another thing to consider is that the liquidity of the market can bring an increase in volatility. The ability to buy and sell quickly can cause huge swings in supply and demand. Depending upon your situation and investing goals, this can be either a huge negative or a huge positive. There is not a one-size-fits-all answer. Right now, we are starting to see volatility. There will certainly be even more volatility in our market in the years ahead. But the right investing strategy—faster turnaround on buying and selling—can use that volatility to your advantage!

Stocks Are Agile

When most people think about profiting from movement in the stock market, they think of one direction of movement: up. They don’t understand that stocks are agile.

You can learn to profit from a stock no matter if it goes up, down, or sideways.

That’s very tough to do in business, but in the stock market, it doesn’t matter—because there are profit strategies for movement in any direction.

The stock market is probably one of the easiest investing vehicles to earn a profit in relationship to the economy. When the stock market goes up you can buy stock, and when the stock market goes down you can short stocks (shorting a stock is positioning yourself to make money when the price falls). Another avenue of profitable stock market investing is the options market. An option is the right to buy or sell a particular thing at a specified price within a set time frame—if you believe the underlying stock’s value will increase, you buy a call; if you think it will decrease, you buy a put. You can also buy options contracts on stocks to hedge against market changes to either give yourself a bigger return on investment than buying the stock outright, or insulate yourself from big losses.

If you use the stock market and the options market in harmony with each other, there are many income strategies that can provide cash flow even when the stock market is stagnant or going down.

Stocks Give Us the Ability to Scale

There is a common misconception that you need a lot of money before you can begin to invest. Fortunately, investing in stocks allows almost anyone to begin their investing sooner rather than later.

Because buying stock is buying only a share of a company, buying stock is a whole lot more affordable than buying an entire company or starting a business. But the beauty of this is that you can own exactly the same stocks as a famous investor like Warren Buffett. The difference being, you’ll probably buy a smaller number of shares than Buffett.

A company you want to invest in may be a multi-billion-dollar enterprise, but you may be able to get a single share of its stock for just $25. The cost effectiveness of stock allows you to scale up into your investing as you gain the means to go bigger. For the average person, this is a faster way to invest than saving up for decades to purchase a franchise or some other business.

Just as we saw with stocks, options are also a very affordable way for anyone to begin their investing. As you advance in your knowledge and experience with options, you might be surprised to find just how much stock you can take control of for relatively small amounts of money and risk.

Scalability permits almost anyone to quickly place an asset on his or her financial statement. In fact, acquiring an asset with stocks can be done faster than any other asset class.

One Word of Caution

No investment is good or bad. There are no such things as bad investments, just bad investors. Your investment is only as good as you are. Before you get in the stock market you need to get educated.

There are so many ways to get going with your education. You can take online courses, attend local workshops, or read a bunch of books.

But please, do not go into stock investing without first investing in yourself and your education.


Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The Daily Reckoning