Let me clarify. When I talk to people about investing in the stock market I typically run into these two types of attitudes:
1. Distrust – they tend to distrust the system due to its perceived volatility. And basically, they think investing in stocks is too risky and somewhat akin to gambling.
2. Fear – they fear they would lose all their money if they invested in stocks. They might also fear that some cataclysmic event will totally bring the stock market down.
The Yin and the Yang
I personally am far from being an expert in the field, but with regards to the stock market, we can all look to the East for guidance.
Just as Yin and Yang represents the universal law of opposites in Chinese philosophy (night and day, light and dark, hard and soft…), so too can this be applied to the essential characterstics of the stock market. The market can become bullish as shares of stock rise and perform at a higher level. And it can become bearish when shares of stock plunge into the red.
Keep in mind though, this rise and fall sometimes doesn’t happen naturally with all stocks, and the companies they represent. But, then again, this too is in keeping with the universal laws of Yin and Yang, as new companies are born, so do companies die off and go out-of-business. Life and death is also reflected on the stock market as well.
Well, everyone should know that Inflation is a reality. It is fact. And year after year, the cost of living will continue to rise.
And this is where the stock market comes in. If the price of everything goes up, eventually, so can the price of stocks. Of course, this is true, providing that a company and its stock is performing and continuing on its path of success. Companies in dire straits obviously will reflect their problems on the prices of their stocks.
But although inflation is fact, does it really affect the stock market? Is it really a good indicator of the nature of the stock market?
In the end, one can use the rise in stock prices to reap earnings over time. And more if it’s a dividend stock.
Chart – Whole Foods Market
Here’s a chart detailing the last 5 years of Whole Foods Market stock. In December 2006 the stock was above $50. Then around the time of the stock market crash and financial crisis of late 2008, the stock had plunged down to a low of $7.04. Okay, I remember during that time everyone thought the world was going to end in the biggest financial disaster since the Great Depression.
Somehow, Whole Foods Market’s stock seemed to bounce back to even higher prices with a 52 week high of $74.45!
Inflation, or what?
But, Whole Foods is also a great company that provides the best quality of whole, organic foods. And even though $WFM is known for their high prices, people still flock to this high-end retail grocery store! The organization of the aisles is impeccable, with attention to ambiance and presentation. Who wouldn’t want to just hang out in a Whole Foods store?
But anyway, this is just one example of a stock that experienced a rise and fall, yin and yang, and further rise due to the nature of inflation and how prices rise, just as the value of essentially all things rise over the years.
The Zen of Simplicity
I know that this might be an over-simplication of the nature of the stock market. It’s obvious that there are more complexities as to the rise and fall in stocks, but my feeling is to keep things as simple as possible, and not to complicate things, but…
Life should be simple. Why complicate things?