Filed under: Personal Finance, Dr. Boyce Money
All of the information I've presented thus far may not make much sense initially, but it's really quite simple. The success or failure of European banks is important for Americans, since there is (what my dissertation chair Andrew Karolyi at Cornell University might say), "financial contagion" between U.S. and foreign markets. This means that if their economy is "sick," we may get sick too. On the other hand, if they are doing well, then we may get better also.
Increases in construction and other forms of spending are good economic indicators, mainly because an economy is driven by spending: Consumer spending, business spending, as well as general investment. When companies are putting their money out to hire workers, build buildings and attack new projects, it means that the economy is on its way up.
This leads us back to you. As you watch billions of dollars being created at the drop of a dime in the stock market, is there a way for regular folks to cash-in? Yes, there is. I'll lay out a few quick and simple steps regarding how you might be able to personally profit off the stock market's recent surge:
1) Think like a boss: You are not meant to work for money for the rest of your life; there is a point where your money should also be working for you. Your goal should be to own something, whether it's a home, a business or a few stocks, bonds or whatever you choose. The path to wealth goes through a town called "saving and investing," so start figuring out how you can take the bottom 10 percent of your paycheck and use it for investing.
2) Think long-term: You aren't going to get rich overnight in the stock market, or by picking the right stocks. You get rich by investing consistently and leaving your money there for 10 years or more. So, a good investment strategy is to put $20 per month into your investment account, and doing so on autopilot. Your money is like a clock: It only moves when you aren't watching it, so don't find yourself analyzing every blip in the stock market. A long-term investor who spreads his/her money out usually builds wealth after a while.
3) Gain financial literacy: If you want to build your wealth, commit yourself to spending 30 - 60 minutes per week reading basic information on stocks. Google search terms like "basics of investing," or "what is a stock?" As you gain comfort with investing, you'll find that the things that once confused you suddenly become simple.
4) Don't try to pick individual stocks, focus on mutual funds at first: If you were to ask me what stocks I own, I wouldn't be able to tell you. My first investment experience came by having a percentage of my salary invested into my retirement plan at work. Your employer may offer such an alternative, and if they don't, you can probably find one at your local bank. Simply go in, tell them that you'd like to invest, and ask them if they can guide you toward some retirement options. They should be able to guide you to one of the tax-deferred options offered by the government.
In addition to mutual funds that allow you to invest tax-deferred money for retirement, there are also other mutual funds you can consider. I like mutual funds personally, because they spread your money around and don't put it all in one stock. The point in everything I am telling you here is that America is a wealthy country, but most of that wealth goes to the owners of capital. In order to get ahead financially, you have to own something. Working for other people is usually not the way to get rich.
Dr. Boyce Watkins is the founder of the Your Black World Coalition and a Scholarship in Action Resident of the Institute for Black Public Policy. To have Dr. Boyce commentary delivered to your email, please click here.