In 2017 we heard over and over again, “the stock market hit a new record.”
Surely that’s good news for Wall Street pros, but what does it mean to the average Joe?
A thriving stock market can benefit even people who don’t earn their living on Wall Street in a number of ways.
Sidenote: Relatively few stock traders actually work on Wall Street anymore. That figure of speech lingers from the pre-internet era when professional traders bought and sold stocks on the floor of the New York Stock Exchange – which happens to be on a short street in Manhattan named Wall. These days, the majority of stock trades take place via computer terminals around the world.
3 ways ordinary people benefit from a booming stock market:
1) Return on investment
You don’t have to be a financial guru or have a lot of money already to make money in the stock market. A simple formula for making money with stocks is buy low and sell high. When the market rises steadily for a long period of time, you have better chances to sell high.
If you have a self-managed retirement plan at work, look for investment options that invest in stocks. Many IRA accounts allow you to invest in the stock market too. Key words to look for in investment choices: stock, market, index, growth and value.
Outside of your retirement plan, look for ways to put money in stocks or stock-based mutual funds. These can be found at many full-service banks or credit unions, and definitely through brokerage firms.
Caution: While you CAN make money investing in stocks, you can also LOSE money. This is sometimes referred to as a risk-reward relationship. In theory, the greater risk you take, the higher the reward you should expect. In reality, plenty of stories exist of people who took big financial risks and had little or nothing to show for it in the end.
2) Job growth
An expanding stock market often results in businesses having more money to expand their operations. Few businesses can grow without having people do more work. Therefore, as companies grow they bring on new employees or pay existing workers higher wages or offer overtime pay.
Whether your employer is offering incentives to earn more or adding staff to the payroll, either situation can be beneficial for you. Working more hours speaks for itself. What may not be so obvious is that a growing workforce often opens up opportunities for promotion into roles with higher pay.
3) Business opportunities
Small business owners and entrepreneurs often see new opportunities to grow their business during a booming stock market. When people or businesses realize profits by selling stocks, they end up with more money to buy stuff. Whether it’s vacations, home improvement or personal services they choose to purchase, additional demand for these things means business opportunity for people who can meet the demands of the public.
Timing is often critical for a new business to succeed. Well-managed businesses tend to have a greater chance of early wins if launched during an upswing in the overall stock market.
It’s been said that a rising tide lifts all boats. The same can be said for the stock market – when it’s rising across the board, even the average person can benefit.