Why Stocks Are the Safest Investment?
It is often said that the stock market carries more risk than many other asset classes. For example the bond market is considered relatively safe, treasury bills are considered the gold standard for safety to the point where returns are generally offset by the treasury bills returns because they are considered risk free.
So are these risk assumptions any good? I don’t think it’s really safe to assume that treasury bills and other bonds are any less risky than stocks as a whole over any significant period of time, not to mention other safety investments like cash or gold. This is because these investments are purely reactive to the value the market it gives it. Gold is gold and it doesn’t change, it’s the same metal it has always been so it’s only people’s perspective of value plus some manufacturing and jewelry use that changes its price at all. Bonds are contracts that are already committed to so you can’t change the terms to improve the value. The price is just a comparison of how good a deal you got with your bond compared to the deals people are getting with new bonds that are being issued. The government’s Treasury bill value can be manipulated because the government has the ability to change interest rates.
This is why I like stocks. A company is not a fixed asset, but a group of creative thinking people with some tools. If a company is hurting in a current situation it has the ability to improve or change directions. It has the power of change that other investments don’t have. This ability can take a company that only does well when the economy is good and have it create a new product when times are tough, now it earns money in all cycles.
If you learn stock market trading techniques and stock market 101 fundamentals you can feel comfortable investing in the stock market. The risk comes from ignorance creating situations where people buy after a rally and sell in a panic which provides the worse outcome.
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