August 11, 2017

Buying stock is easier than buying clothes

It is often said that novices should leave stock investing to the professionals. This is also the question of Michael Stadler from Osteopathy Central, whom Dr. Hermann Stern is helping with his retirement savings.

People who advise novices frequently forget a very important fact: Professional investors cannot increase the return on the market. They can only take away a bit for themselves.

Because all stocks are publicly traded, private investors get exactly the same conditions as the professionals, i.e. the same price for the same stock at the same time. This is regulated by law. Whenever this is not the case, someone is committing a punishable offense.

On average, therefore, professionals achieve a smaller return than private investors, because they still have to deduct their costs from the return.

Fortunately, the opinion of all professionals is public: it is reflected in the current stock price. So private investors can comfortably buy shares of large companies because at the same time many professionals are doing the same.

If you invest in large stocks over a long period of time, you are on average better than the professional because you save the money for their wages.

The procedure for purchasing shares is simple. Stocks are traded on a completely transparent and public market, the stock exchange. It's not like clothes which you can buy in other places at cheaper prices. A certain stock costs the same for everyone, anywhere. This is true for large corporations - even worldwide.

That is why stock-picking is simpler than buying clothes because garments can become cheaper at another place at the same exact time.

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