Welcome to the Bull And Bear Profits course on "ETF and Stock Basics"! In this course, we will teach you everything you need to know to get started investing in Exchange Traded Funds (hereafter ETFs) and stocks. But before we get into the details of investing in ETFs and stocks, let’s first discuss why we should bother learning about them in the first place.
Most people (us included) are seeking a long and happy life. We want health, wisdom, peace of mind, love, family, friends and purpose in life. While it is generally true that the best things in life are free, in order to even live in modern society -- much less be happy -- we need to have a certain amount of...wait for it...MONEY! Yes, we need money to pay for our basic needs such as food, shelter, clothing, transportation, health care, etc., as well as for enjoying life with travel, entertainment, education, etc.
How do we obtain the money we need for that happy life? Of course, the first step is to work in a career or business that we are good at and enjoy. With the money we earn working, we can spend it on our needs and desires. But we can also save some of the money we make working. This savings is the key to creating long-term wealth that we can use to spend on our needs and desires when we are unable or unwilling to work, such as in retirement...as well as paying for big ticket items such as a car, house or children’s education.
If we just put our savings under our mattress, bury it in our backyard or deposit it in our bank account, it will likely become less valuable over time due to inflation. Inflation is the rise in overall prices and the cost of living. If you simply put your savings in a bank account earning no interest, the value of your savings will likely fall by at least 2% per year. In only 20 years, 2%/yr inflation can cut the value of your savings by over 30%!
Even if you put your money in a savings account earning 2% interest, you will still likely be losing purchasing power every year. How? First, the government will tax that interest income, so the after-tax interest rate will be something less than 2%. Then, if inflation is 2% or more, your effective after-tax and after-inflation interest rate will be negative!
Thus, to even maintain -- much less grow -- the purchasing power of your savings, you will need to invest your savings in something that will earn at least a 0% positive total rate of return over time AFTER inflation and taxes. That typically means a nominal pretax return of least 5% or more.
How can we earn such returns? By investing in stocks and ETFs! Stocks and ETFs can generate annual returns well over 5% and even 10% if you know how to invest in them wisely.
For a more detailed discussion of the importance of investing for bull and bear profits, please see our free Special Report titled “Why You Should Invest For Bull And Bear Profits."