Essay On Importance Of Financial Education (Stock Market)

The stock market could be the most crucial part of your retirement. Without investing you are missing out on a huge opportunity to save for your future. This is why people need to be better educated about the stock market. Being educated in the stock market can benefit your investing by using economics, strategies, and saving for the future.

First, being educated in economics can benefit your investing.  To Begin, “When GDP is growing, individual businesses are producing more and usually expanding.” (Investopedia team, 2021). This shows us that in countries with a higher or growing GDP you have a greater chance of benefiting because most stocks will grow with their economy. This could be a  Additionally, “A rising stock market is usually aligned with a growing economy and leads to greater investor confidence. ” (Investopedia team, 2021). To add on, the growing GDP and economy will cause the market to start to grow and will create a bull in the market, this is caused by investor confidence because the price is raised and they are not worrying it is going to go down. Moreover, “To me, it is self-evident that the markets often behave irrationally.” (Sommer, 2022). Sommer shows, that in cases of economic growth and collapse the market overreacts, this also proves that you should not react irrationally just because of what the market is doing. Finally, “  This is how being educated in economics can benefit you in your investing.

Another reason for being educated in the stock market is to learn strategies that can greatly benefit you. One strategy is, “A positive A/D [(Accumulation Distribution)] indicates that prices were higher when they closed than when they opened; a negative A/D indicates the opposite.” (Banton, 2022). This strategy assists with finding if the stock is being distributed or accumulated if it is being distributed the stock will crash if it is being accumulated there would be an increase or bull in the market. In addition, “OBV [(On-Balance Volume)] is a leading indicator, so it typically rises or falls before the actual prices.” (Banton, 2021). A second strategy is beneficial to learn because it gives you an accurate indicator in advance before an event happens. This is helpful because it gives you a warning of when to buy or sell stocks. One of the best strategies is, “Stay away from investment strategies that are too obscure, complex or out of your wheelhouse to keep up with.”(Divine)This quote is the biggest tip to learning about investing because it is the way you are going to lose money. Until you are confident with the strategies you have learned you should stay with more basic strategies such as investing as much as you can or only investing 10% of your portfolio at one time, these will just guarantee that you are making some money but not losing a lot of money. These are some strategies to be educated on to benefit you in your investing.

Being educated on saving with stocks and investments can benefit you in the future. First, “A single $10,000 investment at age 20 would grow to over $70,000 by the time the investor was 60 years old (based on a 5% interest rate).” (Folger). This demonstrates how you can make a simple investment in a safe stock or a group of stocks called an index fund which will return more money each year than losing money to interest while it sits in the bank. Secondly, the table shows inflation rates have become much larger over the past few years. For example, in 2015 we experienced inflation of only .7 percent but now in 2021, we experienced inflation of 7 percent. (Amadeo). This shows, that when you are educated about interest you will realize you are losing a lot of money by not keeping your money in stocks because instead of your money becoming less valuable, you can make more money than the annual interest rates by investing in the stock market with an average return of eight percent. Finally, “Having a portfolio with 25% in bonds helps to mitigate the risk a bit while still helping you aim for higher returns.”(DeMatteo). This demonstrates that your money will be safer when you put 25% into a bond or a safer option to invest because all the bond does is grow high interest on the money you already have with close to zero risk but high upside over a long period.   This evidence shows that being educated in saving money in the stock market can greatly benefit you.

This is how being educated in the stock market can benefit your investing. Some may argue that you should not teach investing in schools because you can lose your savings. But when taught correctly it can set you up for retirement early. This evidence proves that, if you follow some of these tips to investing that we could learn in school then it will positively impact your future.