Chapter 2 The Risk of Not Investing in Stocks

“I’d like to live as a poor man with lots of money.”

—Pablo Picasso

What if in Vegas there was a game where you could potentially double your money? Sure, you say, what are the odds? Oh, there’s no major risk based on history, everyone who plays makes money, but some people make double or more. Okay, so what’s the catch? Well, the catch is that the game takes 15 years from when you place your stake until you get your money back.

For many people that’s a big hurdle. We are tuned into instant gratification. The credit industry means that many purchase things they can’t even afford yet. McDonald’s has served billions by serving a whole meal in under a minute or two. And get-rich-quick schemes of dubious quality are everywhere.

However, history suggests that if you have patience and persistence, you can make considerable money by having a prudent, long-term approach to investing. However, there is a catch, and it’s in having a long-term focus and staying the course. The very reason the stock market is able to offer high returns—and the reason not everyone does it—is that it is considerably more risky over the short term.

The Short-Term Risks

Sometimes stocks are very risky—how does losing half your money in a year sound? How about seeing your investment fall in value for 5 of the months even in an average year? Well, that can be part and parcel of stock investing. In order to earn good returns, you need to stay the course, and ...

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