I'm Not Good at Picking Stocks. Here's Why I Have a Brokerage Account Anyway
Why would you invest in a brokerage account if you aren't good at it? Find out here why buying stocks is key to your wealth-building efforts.
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I am not very good at picking stocks to invest in. I don't like doing the necessary research into different companies, and looking at charts to monitor trends in stock price performance isn't something that I find to be very fun or enjoyable.
While I have no interest in building a portfolio full of individual stocks, I still have a brokerage account. Here's why.
A brokerage account opens up the door to getting my money in the market
Investing when you aren't good at picking stocks may seem really risky. But there's a simple reason why that's not the case -- and why foregoing a brokerage account and passing up on putting your money into the market would be a huge mistake.
Here's the big problem. You are usually not going to be able to get rich if you have to personally work for every dollar that you end up with. You have limited time and the majority of us don't earn millions of dollars a year, so you're going to need some help building wealth.
For most people, the best place to get this help is from putting their money to work for them (unless they happen to have rich family members who just give them cash -- in which case, can they adopt me?). You can put your money to work for you by earning returns on the funds you have, and then reinvesting those returns. This is called compound growth.
Your money doesn't need to take vacations or limit its hours to work -- it can keep earning returns every day, and those returns can keep being reinvested, and your money can keep growing. Your money also never has to retire, so it can keep working for you forever.
But you want to earn a reasonable rate of return for this to be effective. And that usually means you have to invest in the stock market, since most safer investments (like savings accounts) provide a very low return on investment (ROI). And most investments that could potentially provide a better ROI than stocks are complicated and present a high risk of losing money.
Enter, ETFs
Opening a brokerage account actually makes it really easy to earn a great return on your investment with minimal risk -- even if you know nothing about stocks. You can pick a broker that helps you invest in exchange-traded funds (check out the best ETF brokers to find one). ETFs are traded just like stocks, but your money goes into a big pot and is used to invest in a bunch of different companies.
Different ETFs might invest in different aspects of the market, like marijuana ETFs that give you a stake in companies in the cannabis industry, or healthcare ETFs, or whatever other field you're interested in. You can also just pick an ETF that tracks the performance of the market as a whole -- which is what I did. ETFs charge very minimal fees when they track financial indexes, and you minimize your risk because your money is spread around in so many investments.
I invest in ETFs that track the performance of 500 of the largest U.S. companies because I know those funds produce consistent returns over time -- typically an average 10% annual return over the long haul.
My brokerage account helped me find my ETF and get my money into it, so I can grow rich.
Investing in the stock market is crucial to building wealth
To understand why investing in an ETF is critical to building wealth, compare how much you would end up with after 20 years if you put $300 a month into a savings account paying the national average rate of 0.46% versus if you put that same $300 a month into an index fund offering a 10% average annual return.
| Final balance after 20 years at 0.46% | Final balance after 20 years at 10% |
|---|---|
| $75,236.06 | $206,196.73 |
As you can see, you absolutely need to put money into the market to build real wealth. So, even if you are like me and you're not good at picking stocks, open a brokerage account and look for an ETF to invest in. When your money works harder for you and helps you grow richer, you'll be very glad you did.
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