If History is any guide, and it's the only guide we have, owning a diversified portfolio of stocks or stock funds over your lifetime is the most simple and most effective way to build wealth.
But what are "stocks"?
What is the "stock market"?
Do you need to be an "expert" to own them properly? Would a degree in economics help? How about watching a lot of "financial news"?
The short answer is absolutely not. (Wall St clip Gekko S&P)
A "stock" is a piece of ownership of a company. If you own stock in a company, YOU are a part owner. You, and your other stockholders, are the boss.
For example, if you own an Standard & Poor's 500 Index fund, you own 500 of the largest, most profitable, most innovative companies in the world.
And owning companies, or "stocks" is the best way to grow wealth because companies, unlike land, metals, comic books or cars, have INTRINSIC VALUE. They grow, they innovate, they create, they buy other companies, they make money and give some of the rising profits every 3 months back to you, THE OWNER.
There are thousands of analysts, hedge funds, private equity experts and mutual fund managers that cannot beat the return of a low-cost index of companies, which don't change every month and require no additional expenses to own - no repairs, no maintenance, no insurance, no carrying costs, and no tax on the gains until they are sold.
The good news is - the more simple you keep it, rebalancing only once a year, the greater your lifetime return.
Compounding is the key
"The key to making money in the market is staying in the market" - Warren Buffett
Sources: Standard and Poors, Nick Murray "Simple Wealth, Inevitable Wealth"