Why I believe investing is the key to building wealth
Most people think getting ahead with money is about earning more. Earning more helps. But in my experience, the people who build real wealth are the ones who put their money to work, and the stock market is the most accessible way to do that.
Why the stock market caught my attention
As an accounting student, I spend a lot of time looking at how businesses make money. At some point I realized that owning a share of a company means owning a piece of that money-making machine. When the business grows, your share of it grows too. That idea hooked me, and I've been following the market closely ever since.
Time is the biggest advantage you have
The math behind investing is simple, and it's powerful. Say you invest $200 a month and it grows at an average of 7% a year, which is roughly in line with the stock market's long-term history after inflation. Here's what that looks like:
- After 10 years: about $34,600, from $24,000 you put in
- After 20 years: about $104,200, from $48,000 you put in
- After 30 years: about $244,000, from $72,000 you put in
- After 40 years: about $525,000, from $96,000 you put in
Look at the jump from year 20 to year 30. The money more than doubles, even though you only added $24,000. That's compounding: your earnings start earning their own returns. Waiting ten years to start doesn't cost you a little. It can cost you more than half of what you would have had.
Consistency beats timing
Nobody can reliably predict what the market will do next week. What you can control is showing up every month. Investing the same amount on a schedule, no matter what the headlines say, means you buy more shares when prices are low and fewer when they're high. Over time, that steadiness matters far more than picking the perfect day to buy.
Accounting makes you a better investor
Every public company publishes an income statement, a balance sheet and a cash flow statement. Knowing how to read them changes how you see a stock. Is revenue growing? Are profit margins holding up? Is the company actually bringing in cash, or just reporting profits on paper? How much debt is it carrying? You don't need to be a professional to ask those questions, and the answers tell you a lot more than a stock's price chart.
Get the basics right first
Investing works best on a solid foundation. Before putting money in the market, I think it makes sense to:
- Build an emergency fund so a surprise bill doesn't force you to sell at a bad time.
- Pay off high-interest debt. A credit card charging 20% or more is hard for any investment to beat.
- Get your employer's retirement match if you have one. It's one of the best returns available anywhere.
That's a big part of why I built Leftover Planner: to help people figure out what to do with the money left after bills, whether that's paying down debt, saving or investing.
Index funds or individual stocks?
Picking individual stocks is exciting, and studying companies is one of my favorite parts of following the market. But research has shown for decades that most professional fund managers fail to beat a simple index fund over long periods. For most people, a low-cost index fund that tracks the whole market should be the foundation, with individual stocks, if any, as a smaller slice.
Fees matter more than people think. A fund charging 1% a year instead of 0.05% can quietly eat tens of thousands of dollars over a lifetime of investing, because you lose not just the fee but everything that fee would have grown into.
Accounts that help your money grow faster
Where you invest can matter almost as much as what you invest in. Tax-advantaged accounts like a 401(k) through work or an individual retirement account (IRA) let your money grow without being taxed every year, and a Roth IRA can let it grow tax-free for retirement. Contribution limits and rules change, so check the current year's numbers on irs.gov before you decide how much to put in.
Mistakes I try to avoid
- Chasing hype. If everyone online is talking about a stock, a lot of the easy gains are probably gone.
- Panic selling. Selling after a big drop locks in the loss and often means missing the recovery.
- Putting everything in one place. Even great companies can stumble. Diversification is protection.
- Investing money you'll need soon. Money for next year's tuition or rent belongs in savings, not the stock market.
- Waiting for the "perfect" time. The best time to start is usually as soon as your basics are covered.
You can start small
You don't need thousands of dollars to begin. Many brokerages have no minimums and let you buy fractional shares, so even $20 or $50 a month can get you started. The habit matters more than the amount at first. As your income grows, you can increase what you invest.
Think long term
The market will have bad years. Prices will drop, sometimes sharply, and it will feel uncomfortable. Historically, the investors who did best were the ones who stayed invested through those drops instead of panicking. Broad, diversified investments like index funds spread your risk across hundreds of companies, so you aren't betting everything on one.
I truly believe investing is one of the keys to long-term success. Not because it makes anyone rich overnight, but because it lets time and discipline do the heavy lifting.
This article shares my personal views and is for education only. It isn't financial advice. Investing involves risk, including losing money, and past returns don't guarantee future results. For decisions about your own money, talk to a licensed financial professional.