Opportunities in the Global Economy

There are many opportunities to get into the stock market. Below is a list of how many stocks there are on exchanges worldwide:

  • New Zealand Stock Exchange — 160 stocks
  • Australian Securities Exchange — 2200 stocks
  • New York Stock Exchange — 2400 stocks
  • London Stock Exchange — 2400 stocks
  • Nasdaq Stock Market — 3900 stocks

The companies on the stock market will vary in terms of how speculative their stock is. There will be stocks that are very high-risk, as well as medium-risk and low-risk conservative stocks.

‘Where should I place my spare money? Is investing better than allowing it to sit in the bank?’

Some of you might already be considering your options. If you want to learn how to build a diverse portfolio, Wealth Morning is the best resource to follow. They provide free investment resource that will show you, step-by-step, how to avoid common investment mistakes and start building wealth.

How can you develop a second source of income?

You might be working a standard 9-to-5 job. You might think to yourself, ‘How can I make an extra source of income? How can I retire early? How can I secure my wealth?’

Across the stock market, there are many conservative options which pay a high dividend. Some provide a yield as much as 6%–7%. Some pay even higher.

This is definitely something worth looking into. As time progresses, the value of your money becomes less valuable due to inflation.

Why does inflation happen? It happens when the demand for goods and services is outpaced by the supply of money. Therefore, as a result, the prices for goods and services become more expensive. Money loses its value. Quite simply, you have too much money chasing too few goods.

Between the years of 1979–2019, the rate of inflation in the United States has increased considerably. The price you’d pay for something has soared by 253.7%.

This means that if you had spent $4.50 on an ice cream back in 1979, the value of it today would be worth $15.91. Yes, money loses its value considerably over time.

So is it wise to hold some portion of your money in stocks? Or just leave it sitting in the bank on a low interest rate?

Should you put your money in stocks or banks?

Interest rates worldwide for banks are generally very low. In some parts of the world, interest rates have even slipped below zero. It’s not quite enough to keep up with the rate of inflation over the years.

From 1979–2019, if you had US$10,000 in your bank account on a 4% interest rate, you would receive US$400 annually before tax.

As of 17 October 2019, that money would have accumulated to US$16,000 before tax.

However, if you paid for something worth US$10,000 back in 1979, the price of it today would have be $35,366.25.

What a difference in inflation over 40 years!

To put that into perspective, let’s assume you had invested 10% of that US$10,000 into shares for McDonald’s Corp in 1979. As of 17 October 2019, you would have made US$191,000, not to mention the dividends you would have collected along the way.

Warren Buffet made a good point, saying if interest rates for banks remained below 3%, it would make sense for stocks to have high P/E (Price to Earnings).

So, when you weigh up what’s happening in the economy, if inflation is at 1%, you would comfortably hold CAPE ratios of 50, with an earnings yield of 2%. This would be the only way you could make a positive return on the market.

The answer today is clear: you need to invest in productive assets to secure your financial security. Stocks — particularly dividend-paying ones — are a good way to attain passive income, even as you protect your money from the crippling effects of inflation.

You can do better with stocks than allowing your money to sit idly in the bank.

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