Holding cash makes you poorer; instead, invest

Cash is great, but it’s a terrible investment. Cash is just a tool. It helps you buy stuff, feed your kids, keep sheltered—you know, live. But, cash needn’t just be spent; it can be invested.

Doing that grows your wealth. That’s the secret rich people know.

See, holding cash is a wealth-killer. It doesn’t just keep you from growing your wealth; you’ll keep losing it. That’s right: Holding cash makes you poorer. I know, this may sound completely absurd, but, I assure you, it’s true. It’s as true as the sky being blue and the water being wet.

How inflation works against you

And that truth about cash losing value has a name: It’s called inflation. That’s when things and services that we buy get more expensive over time. For instance, the real estate market is getting more expensive, so are rents, groceries, even our Netflix subscription. Prices go up. That’s inflation at work.

And if prices are inflating, and you’re in cash, that means your cash’s inherent value is going down. That’s because it will take more cash to buy the things you were buying as the prices go up. We’ve all heard about how older people say, “in my day” a candy bar was a nickel and buying a house was $30,000. Now, it’s not that; it’s much more expensive. Our dollars don’t go nearly as far as they used to. That’s inflation.

To beat inflation, invest

So this is where rich-people-thinking shines: They invest.

There are all types of places to invest your cash, like bonds, real estate, starting a small business, etc. But, for this post, I’m going to focus on stocks. That’s the stock market, where anyone with some cash and a brokerage account can buy pieces in companies like Apple, Google, Netflix, etc.

Since money loses its value over time, you need to find ways to increase your money’s value. And investing in stocks is one of the best ways to do that.

You see, companies, or at least good ones, grow. They innovate, make new products, gain more customers, sell advertising, make shows we binge because the pandemic is driving us nuts. And all of that generates more value. And that value generation occurs faster than inflation. For tech stocks, it’s often much much faster, like blow-your-freakin-underwear-off fast.

The power of investing in technology stocks

In the stock market, tech companies in general have been giving investors returns that would usually only be available to venture capitalists. What I mean is that the stock market historically has given investors a 10% increase on their invested money’s value. But, some tech stocks in the past decade see hundreds or thousands of percentage growth. For example, people who invested in Amazon’s IPO and held on to 2020 would have seen a 120,000% increase in their investment. Yeah, let that sink in.

So if you’re experiencing that type of growth in a stock you’ve invested in, you will beat inflation easily. Here are some simple numbers to chew on.

Inflation often grows at 2-3% a year, so that means your money is going down that much yearly if it’s in cash. That means $100 becomes $99 or $98 rotting away in your bank account or under your mattress, after inflation has its way with it after a year. But if you took that $100 and put it into a tech stock, let’s say Netflix and the stock price goes up 100% in two years, which has happened, your $100 will be $200. Now I haven’t adjusted for inflation. But the point is your cash, when invested well, can grow incredibly despite inflation.

Closing thoughts

Yes, stocks can go down. And, they do. There have been times when I’ve lost money on a stock. But, really, if you hold on to those stocks, most of them go back up. See, just because a stock plummets doesn’t mean you need to sell it. If you hold on and bear the pain of “losing” money and stay patient, most stocks rise back up and will increase even higher than where you initially invested.

Time is really the secret sauce for investing. When an investor shows patience, they will exceed their expectations of how much they can grow their cash.

And if you do that, you won’t just beat inflation.

You’ll be rich.

One of the greatest secrets to making money in the stock market

The hardest thing about investing in stocks is letting go of your money. Let me explain.

When you invest your money into the market, you can’t control how the stock price will behave, and often it will go down. And the temptation is to sell when it does that. And that will mean you will “realize” your loss, which means the money you were losing before you sold your stock, called a “paper loss,” will become a real one if you sell your stock when it goes down from the price you bought it. So you will walk away with less money than you started with. No one wants that.

But it has happened to everyone; I’ve done it; even the pros have, too. But that needn’t happen to you. And it’s all about your approach.

If you approached buying stocks differently, you’d avoid realizing your losses and will even make gains. You can even get rich. And that means you need to understand that once you invest your money into a stock, you need to cease thinking about it as money to succeed.

You see, investing in stocks is about thinking less about your money and focusing more on your investments. Because to make more money in the stock market you can’t think about money. That will just make you lose it faster.

When you focus on your money when it’s invested in the market, especially in tech stocks, there’s volatility. A lot of it…boat loads of it. Those are the ups and downs a stock price will go through on any given day. You know, the ones that scare the crap out of you, that make you jump ship and sell before you ever intended to, the ones that make you feel like you’re going to lose all of your money if you keep holding on to that stock. Yeah, those.

Holding on when you get into a stock is especially hard when you first buy a stock and then it goes down, like, immediately after you buy-in. It feels awful. I know. I’ve been there—many times.

I bought Nvidia over a year ago, and it dropped by 50% or more over a month or two. So, at that point, I was thousands of dollars down. And believe me, I wanted to sell and realize my paper loses. It felt like everything inside of me was burning down. But I held on. I didn’t sell.

Instead, I waited.

If you buy a good or great company’s stock and it goes down, they will often go back up and continue to grow. That’s what great companies, especially the ones that are market leaders, which Nvidia was and is, do. Waiting and holding your stock position will help you avoid a loss even when you’re thousands of dollars down. And more importantly, eventually, you’ll gain.

To do that, you have to let go of your money. You need to stop thinking about your money as it is. Yes, it’s hard to see the ten thousand dollars you initially invested become five thousand when a stock price drops. And, yes, it does feel like someone just reached into your pocket and robbed you in broad daylight, while smiling at you. But, if you can short-circuit your brain and stop thinking about your money as money, you’ll begin to see something else. Something better.

You’ll start envisioning yourself as an owner. Because, really, that’s what buying a stock means. You own a small piece of a company. When I bought Nvidia’s stock, I owned a small piece of the world’s best chip designer. And sure, the stock fell out of favor right after I bought it. But when I wasn’t focusing on my money, and the imaginary guy’s hand in my pocket, I was able to focus on my investment. And I remembered why I bought it in the first place, which made it easier to hold on to the stock and wait. And I could see that the company was going to be ok and was able to remember that it was the market leader and the best at creating AI chips and would continue to innovate. Doing that helped me stop thinking about my 50% drop and realize I owned a piece of a world-class company.

After several months, Nvidia fully recovered to the original price I bought it at. Then it continued to go up, as did my net worth. I did sell it, unfortunately. That’s because it dipped during the covid scare earlier this year, which is when I sold it, to my chagrin. It was for a gain, but for far less than I would have if I held on. If I would have held on, instead of making a little bit of money, I could have more than doubled my money.

That’s the thing about making money in the market. When you think less about your money, the more of it you often make.

Now, I’m not saying that every stock will recover or will be a winner. And, I’m not saying that everyone can get rich investing. I am saying that you need to do your homework and need to invest in the best companies you can find. And if you do, and hold on, your chances of growing your wealth is much greater, than if you don’t.

You see, you don’t become rich by thinking about money. No. You do it by thinking like an owner.

Get posts sent directly to your inbox? Subscribe! And reap the rewards.

Processing…
Success! You’re on the list.