My favorite "four-lettered" word is RISK. Lord knows there are plenty of surly terms to choose from when you're dealing with the stock market every day. For the most part, people of color associate risk with "lose it all". Wrong! Wrong! Wrong! I grew up watching my grandmother and grandfather play the illegal "numbers" every day. Then in the evenings, I rode with dad to 7-eleven to watch him play the "legal" numbers. I absolutely hated 7-elevens's, even if I guilt tripped my dad into buying me a big gulp. The last thin a nine year-old needed was a extra large Mountain Dew! If I remember correctly, I think my dad hit the number 3 times in ten years. If he was lucky he made $1500 bucks.
7-Eleven was happy, they the sold big gulps, the state lotto sold us the dream and we got a mound of ripped lottery tickets. I'm still not sure why my dad kept them when he knew they were worthless. Talk about separation anxiety. I'm a child of the 70's, money was just as tight back then as it is for folks now. 30 years later, the lotto has expanded world wide and it still sells the same lame dream.
What a scam but the bright side is maybe you'll be lucky enough to have a dream about it.
You remember. Last night I dreamt I was swimming -- play 738! I dreamt I was painted blue-- play 747! I dreamt I was dying, no maybe I was being born -- that's 839 and 938 all day long son!
How about I dreamt I was rich?!
How many families would be living another type of life if all of the money wasted on illegal and state run lotteries would have been invested in the stock market the last 25 years?
I'm not saying they would be rich but I know they'd be better off.
The same folks that spend $10, 6 days a week on legal numbers could have invested the same amount over a year's time. $3120 a year on the lottery up in smoke.
If you were my client and I recommended that you buy 10 shares of a $1 stock at the market open and knew it would be worthless at the close...BUT RECOMMENDED IT ANYWAY, you would think I was incompetent. An idiot! You'd probably sue me and I'd deserve it.
"Hmmmm... "
If you ever make money with lotto -- ITS LUCK! CHANCE! A FLUKE!
But folks do it anyway.
Take that same $3120, at a 7% return for our "investor" after 1 year -- $3338,
5 years $22318.
Problem is, I can hear many of you reading this and saying, "That's all? I'm sticking with the numbers!" That mentality has killed us for years.
Dr. King stated, "Take the first step in faith. You don't have to see the whole staircase. Just take the first step."
I'm going to say this once, and only once, "There's been more millionaires created through investing in the stock market, than have been created by lotto. It's not even close!"
For too many of us, it's impossible to believe.
The stock market rises and falls. This is an undeniable fact.
But it also rises --- after falling and it's done this onsistently since 1926.
The key to successful investing is managing risk while still being able to make a satisfactory return. I hate to burst your bubble but adequate is 10% per year.
But guess what, this all involves RISK!
How many times have you been told, “Don't put all your eggs in one basket.” Spreading the risk over traditional and non-traditional investments (REIT's, ETF's) , as well as over several different sectors can help offset a loss in any one investment.
During tough market period like these can help your portfolio avoid direct hits, see Enron, Worldcom and Bear Sterns -- $150/share to $2 in less than a year...ouch!
Diversification is one of the main reasons why mutual funds are so attractive for all types of investors.
Whether you are investing in mutual funds or are putting together your own combination of stocks, bonds, and other investment vehicles, a great rule of thumb is to diversify.
Do yourself a favor, invest in the stock market, delete 7-elevens from your navigation systems, diversify and embrace RISK.
For a four letter word -- trust me, "RISK" is not that bad after all.
