There are many misconceptions about investing in the stock market. For example, some people believe it’s a form of gambling and it’s an easy way to lose money. Others think that it’s only for older people, or those nearing retirement.
Yet perhaps the biggest misconception of all when it comes to investing in stocks is that you have to be wealthy to invest. That simply isn’t true. These days, literally anyone can invest their money in stocks and take advantage of the power of the stock market to boost their wealth over time.
I was actually discussing this very topic with a local builder just a few weeks ago. When he asked what I did for a living, I explained that I write about investing in stocks and funds and building wealth through the stock market. He was clearly interested because he told me he had a decent sum of money sitting in a Cash ISA earning 1% interest. His response though? “Sounds interesting, but you have to be wealthy to invest, right?”
I was actually quite stunned at this response. Here was a guy who was switched on and had built up some solid savings, yet had no idea that investing in the stock market to grow his wealth was even a possibility. His impression was that investing was only for rich people. At this stage of the conversation, I sat him down and explained that this investing belief couldn’t be further from the truth.
Investing has changed
You see, investing has changed a lot over the last 20 years. Once upon a time, before the internet, stock market investing was probably aimed more at the wealthy. Yet due to advances in technology, the cost of investing has come right down in recent years and it’s now also possible to start building an investment portfolio with just a small amount of money.
For example, with Hargreaves Lansdown – the UK’s largest online broker – you can now start up a portfolio with a lump sum of just £100. You can also set up a monthly investment plan with just £25 per month, which equates to just £5.77 per week. Forget needing to be wealthy to invest – you can invest for the cost of a sandwich and a coffee per week. £25 per month is less than most people pay for their mobile phone plans.
Growing your money
It’s amazing what you could you do with that money and how quickly it could grow. For example, you could invest in Fundsmith Equity fund which deals in high-quality companies all across the world. This particular fund is up 165% in the last five years, although past performance is no guarantee of future performance. Alternatively, once you built up a healthy balance you could pick up some dividend stocks yielding 5% and start building up a passive income. Ultimately, there are many different ways to build up your wealth through the stock market.
The key takeaway here though, is that these days, literally anyone can invest in stocks. If you think investing is only for the wealthy, you’re way off the mark.
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Edward Sheldon has a position in the Fundsmith Equity fund. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.