One of my email subscribers had a view about the stock market that is widely accepted across the world. Their response implied the system was rigged like a casino, a sort of stock market gambling instead of investing. They said:
“I am stuck, thinking that the share market is a giant casino. I am caught up thinking that the 95% of the money invested in the markets is only helping the 5% due to their large influence. I have say one dollar. They have a million in comparison, they can change the outcome of performance, I can’t. The house always wins. The little guy goes home losing their investment.”
I want to preface my thoughts by first acknowledging that your viewpoint on the market is very common. This idea that the little guy can’t win is profusely reinforced in the media constantly. With each new crisis (think back to the housing debacle of ‘08), there are countless new stories of average people getting screwed.
So-called experts and respected authors only perpetrate this myth, and it becomes a handy narrative to help victims with their loss. After all, what is pop culture good for but to absolve individuals of their personal responsibilities and blame it on a broken system.
It’s true that you might only have 1 dollar, and the “big guys” have millions. But you have to understand that the whole of the stock market deals with trillions of dollars. The difference between $1 and $1 million is the SAME as the difference between $1 million and $1 trillion.
Even the most wealthy individuals are barely cracking the surface at being able to control the stock market, much less at a global scale.
Consider that the biggest stocks right now are in the $500 billion range (Apple, Exxon Mobil, etc). The most wealthy man is in the $10 billion range. Now the S&P 500, which is what people commonly refer to when they are talking about “the market”, crossed the $15 TRILLION mark last year.
So even the biggest company only controls around 3% of the market. Take the power of the most wealthiest man and it only adds up to 0.06%. Keep in mind that this only accounts for the U.S. market, imagine how much less power the “big guy” has when you consider the whole world.
Simple arithmetic shows us that even the top 1%’ers and so-called big fish are actually just little fish in this giant world we live in. The idea that big, powerful men can manipulate the market like pawns… while it makes a good story, it doesn’t represent reality.
Stock Market Gambling: How Not to
Look, I don’t want to lecture to you or debate about the validity of this stock market gambling opinion. There are people whose actions resemble gambling, and people who invest wisely.
Give me this time to do something useful for you. Instead of debate, let’s find the solution. I’ll try to briefly show you how NOT to invest, and so you won’t be set up to a failing system. [click to continue…]