Magnify Money did a survey of 1000 Americans, equally proportioned among baby boomers, millennials, and gen X, and found that 60% of them felt anxiety when considering whether or not to invest in stocks.
Allow me to offer an analogy in an attempt to make stock investing a little less intimidating.
Think of exchanges, like the New York Stock Exchange (NYSE) and NASDAQ, as a marketplace just like eBay. It is simply a place where buyers and sellers connect.
- Just like items for sale on eBay are listed, stocks for sale are listed.
- Like eBay, you can narrow your search by categories but instead of Home & Garden, Toys, Electronics, Collectibles & Art you have categories like industry sectors (information technology, consumer staples, healthcare). And within each category you can narrow your search further.
- With a quick browse today, I learned that there are 821,783 listings for just paintings on eBay. On the NYSE, there are only 1,936 (and 2,918 on the Nasdaq) of listed stocks.
And lastly, for this analogy, let’s chat about price.
If prices suddenly drop by 10 or 20% across the board on eBay, how you feel about it entirely depends on whether you are a buyer or a seller. If you’ve been browsing, saving favorites, and wanting a few items but haven’t hit the checkout button yet – you may be elated to have the opportunity to finally check out at a double-digit discount.
If it’s your store and you are who listed the items for sale, you may not be as happy about receiving 10 or 20% less for the same inventory as you sold just a few months ago at the higher price.
This is true for stock investing as well.
When prices drop, like they have this year, it is generally a great time to buy.
If you are contributing to a 401k or other employer plan this year and are discouraged by the balance decrease, remember each month you contribute you are buying at a discount. If your savings account is a little larger than it needs to be, this may be a great year to make your investment purchases.
Conversely, in years like this year, when stock prices are lower, ideally you aren’t selling at a discount. If you are retired and rely on your investments for income, it’s years like this that you should consider less volatile accounts (like a savings account or annuity) for income or slow the amount you are spending from investment accounts, if possible. Not to be too dismayed, just like an eBay store, most of us could keep the store running if we had to sell some of our inventory at a sale price – we’d just like to not have to sell all of it at discounted prices.
Let me know if this helped!
Did this analogy increase or decrease your anxiety around stock investing?
We all are shoppers to one degree or another, let’s make sure we are all investors too!