The danger of buying shares
Bright Johnson

Shares are sold everywhere in the world. From New York to Japan, there are huge stock markets filled with people’s money.

Why do people buy shares? Of course, they want to make money. But do people really make money? Some do, but majority don’t. The truth is that selling shares is a plot used by big businesses to exploit the masses.

If you’ve bought shares or plan to buy shares, the question you should ask is “What will I get from buying shares and when?” There are two questions here: what and when.

This is how the stock market works. You buy shares for a sum and you get a historical 10% compounded return annually. If you contribute 10% of your earnings into the stock market like mutual funds or a 401 or similar investments like Bills, insurance—if you earn $60,000 annually and save 10% which is $6000, or if you earn $30, 000 annually and invest 20% which is $6000 or let’s say you invest $500 a month (which is equivalent to $6000 annually)—on a 10% standardize compounded return, then:
• in 10 years you will get $102,000
• in twenty years you will get $380,000
• in 30 years you get $1.1 million

If you start with $15,000 and add $200 every month, you will get:
• in ten years $180,000
• in twenty years $516,000
• in thirty years $1.4 million

So it will take you 30 years to make a million.

There are two traps here. The first one is “Are you ready to wait 30 years to make a million?” What about if you are 30 or 40 years today, can you wait until you are 60 or 70 to make a million? I don’t think you are that patient. Stockbrokers will tell you “In the long run, you will be rich.” But we all know that “In the long run, we’d all be dead.” Who has time to waste building a fortune when you can become rich in a jiffy?

The second trap is “Will the long run be fruitful?” You can invest and make a million in 30 years, but this growth did not take into account inflation, fluctuations, taxes, and others. The stock market is very sensitive. Anything can set prices declining. Poor management and unstoppable human error can ruin your investments. Who would have thought Enron would collapse. Natural disasters can also ruin your investments. We saw what The Great Earthquake of September 1 1993 did to the Japanese stock market—about $50 trillion was lost. The country has not yet recovered. The decline of physical goods due to the Internet has also forced some stocks to lose value. If Bill Gates goes into a nasty divorce with his wife or if the anti-trust suit filed against Microsoft succeeds, the company’s shares will plummet fast and billions of dollars will vanish.

Anything can make stocks lose value. That is why some rich family don’t sell their business to the public to avoid fluctuations public companies suffer. During the heydays of dotcoms, people, fooled by the advent of the web, blindly invested into Internet startups. It didn’t take long before their stocks became worthless. Yahoo lost 90% of its value and today it is only 10% of its former self.

Although some stocks will do well, you will never know which one will be fruitful. Wal-Mart and Kmart are both supermarkets. If you bought Wal-Mart shares 10 years ago, you’d be making money today. If you have bought Kmart shares 10 years ago, you’d be broke now. How do you know which company will excel in the next 30 years. Nobody knows tomorrow that is why Burton Malkiel, a Princeton professor and former stockbroker said all those trying to forecast the performances of stocks are wasting their time. He said “The history of the stock-price movements contains no useful information that will enable an investor consistently to outperform a buy-and-hold strategy in managing a portfolio.” It is like tossing a coin, it could be a head or a tail, it not the skill you use in tossing it. Nobody can be an expert coin-tosser. You cannot beat the stock market; it only gives itself to you. It is pure gamble. You should adhere to this mantra “I’m not so concern about the retur