Insights

Why You Should Treat Investing Like a Trip to the Grocery Store

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Food prices have gone up substantially around the world. Supply chain issues have helped fuel higher prices, and data from the U.S. government shows that these prices are up 10-11% over last year alone. No matter how much food prices go up, we will continue to grocery shop.

When prices rise, such as during our current inflationary environment, and money becomes tighter, most of us simply become more selective about how we shop. For example, we might wait for a sale to buy food or buy generic brands. We take these strategies and others for a very simple reason: no matter how much food costs we still have to eat.

We should apply a similar line of thinking when it comes to investing in the stock market. Here’s three primary reasons why:

1. Cash is trash.

2. The market always goes up.

3. The best safety net is the one you start yourself.

Legendary investor, and founder of Bridgewater Associates, Ray Dalio has long warned investors about the downsides of holding cash. Annual inflation rates of just 3-5% lead to a loss of purchasing power of 26-40% in ten years.

Recent inflation data lists annual inflation in the United States as 9.1% over the last year. In other words, cash is a demonstrably terrible store of value.

While there have been boom and bust years, the S & P 500 has returned on average a 10% annualized return to investors. This means that over a ten year period you would expect a 135% return on your investment, easily outpacing inflation. This means more money and more security for you and your loved ones.

Even in a down 2022 for the overall stock market, investors can find some huge winners. Hess (HES), which long suffering Jets fans know too much about, has seen their share price rise 63% this year alone.

In addition to the previous two reasons, the last one is that the retirement safety nets for most citizens, especially in the United States, are quite terrible. Some experts say that US workers have the least benefits, including retirement plans. If you’re like most people, your years of loyal service to your company won’t mean much in your retirement years.

However, building your own safety nets and investing wisely (including as often and as much as possible) will allow you the freedom to chase your dreams and live out the values that are most important to you.

That freedom comes from first making frequent trips to the market, the stock market.

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