The Stock Market, in YOUR words
We often fear what we don’t understand. It’s part of being human. There is such a thing as healthy fear, but it’s rarely good to be controlled by fear. Research discovers more every year about how dangerous fear-induced stress is, not only for our mental health, but also for our physical health. So answer this: does the stock market cause you fear? When markets drop 10, 20, or even 50%, it seems like the stock market produces nothing but fear! When the stock market crashed over 40% in the Great Recession of 2008-2009, I was asked where exactly all of the value of those stocks went? How does trillions of dollars of value simply disappear? It’s not easy to explain or understand. And that’s the point. Because “finance” and the “stock market” and “derivatives” aren’t something we can pick up with our senses, they are difficult for our brains to understand. And when we don’t understand something, we start to get fearful when such things start to adversely impact our lives. Here’s your task: either to a spouse or friend, or perhaps in writing, explain what the stock market is and how it works in your own words. I guarantee this will be a short, yet worthwhile exercise for anyone reading this article because it will either allow you to practice your communication of a complex concept or, most commonly, it will reveal your true understanding of the stock market. There’s no shame in not understanding something. That describes most of us most of the time. There is much more in this world we don’t understand than we do. So hopefully this quick exercise will prevent you from making a huge mistake with your hard earned money: Don’t risk what you can’t lose on things you don’t understand. “But Wake, almost every successful person says I should be invested in the stock market.” And I would agree. Smart stewards of resources should likely have stock market investments. But it is foolish to invest without being able to succinctly explain to your family or friends exactly what you put your money in. If you are struggling with explaining what the stock market is and how it works in your own words, then a bit of education will go far. Shoot me a message firstname.lastname@example.org and I will be happy to send you a list of resources to level up your understanding quickly. Here’s the great news: as understanding increases, fear decreases. Fear can make us sick, it can cripple us, and even enslave us. Take your antidote to fear. Pursue knowledge which leads to understanding. If you do that, the best is yet to come!