The importance of investing


When it comes to financial literacy and personal wealth, it’s crucial to understand the importance of investing in the stock market. 

Dai'Tynn Coppage-Walker

Investing has been of recent interest to people during quarantine.

With being at home all day, the internet, video games and online shopping have been ways to keep people busy. Some believe this may be a good time to start making money from the stock market.

According to Paul Koch, professor of finance and Kent Corporation chair in the Ivy College of Business, the stock market is when companies raise capital by selling claims against the firm’s future earnings in the form of bonds and stocks. Investors who buy stocks become part owners of the company, which entitles them to future claims against the earnings of the firm. Stocks can be bought and sold on the stock market.

Beginner investors who would like to invest in the stock market should make sure they are willing to educate themselves on stock information. The Ivy College of Business offers classes that talk about investing in the stock market.

“If you YouTube or Google ‘Rule of 72,’ you can get excellent examples of compound interest and benefits of starting young,” said JD Bond, financial writer for Money Life Wax.

According to Koch, you can also exchange traded funds (ETF) on some portions of the stock market, such as following the ticker symbols VTI, VOE, VOO, VONE and VONG.

Some business professors recommend you start investing in index funds. This helps beginners because it gives benefits at a low cost.

“I prefer index funds, funds like the S&P 500 or Total Stock Market that have historically returned 7-10 percent annually and track the overall market [with] hardly any fees,” Bond said.

Some people also invest in retirement accounts and investment apps to earn more money.

“I have made money in market gains in a portfolio for retirement accounts and the Robinhood app during the pandemic,” Bond said. “I own ETFs and stocks on Robinhood that have had better than the market returns and others I bought at low price and sold for profit a couple days later.”

There has been a lot of hype about the stock market and investing since the pandemic began.

Some financial critics agree it is good to start investing in stocks during a time like this.

“The stock market is volatile anytime but especially during the pandemic and presidential election and other factors such as GDP, unemployment,” Bond said. “The stock market has been on a record bull run for most of the last decade, meaning the stock market has been going up, eventually markets correct themself into a bear market, but no one can accurately predict when to time the market. During the pandemic, long-term investments such as 401k, Roth IRA are great to dollar cost average if you don’t immediately need the money to build compound interest.” 

Even though there are positives in investing during a global pandemic and election, there are also some downsides as well. 

“Yes, you can earn money or lose money, even in the worst markets,” Bond said. “You can through index funds, ETFs, individual stocks, bonds, commodities. Risky investors may also try cryptocurrency or options trading, day trading or penny stocks, but these ways can make you a lot of money but just as quickly or likely to lose money, especially options trading, which is like gambling.”

Truong Duong, associate professor of finance, said even if you do gain money in stocks during this time, he does not recommend timing the market. He also said you should not buy nor sell more during this time.

“For the majority of investors, especially retail investors, research has shown that trying to time the market usually leads to lower returns,” Duong said. 

There are always potential ups and downs when investing in the stock market. When starting to invest, it is important to educate yourself first before diving into the stock market world.