I occasionally hear people talk about investing like they would talk about a side hustle or a hobby. Maybe you know a lot about furniture, or clothing, or campers; you know how to find deals and where you could re-sell the items at profit. So you shop at the right places, you buy stuff that’s underpriced in one place, and you sell it somewhere different for a nice little bit of profit. Maybe sometimes you even do a little refurb work on the items to boost their value before selling. That’s a great side hustle, and lots of people do it. There are mobile apps with the sole purpose of helping you sell the cheap things you bought for more. There are tv shows about it. My wife has even done it, and it definitely can work. But it doesn’t work when you apply the strategy to buying and selling stocks, not even a little bit. Here’s why:
You know that nice chair you found at the flea market for such a great deal? Not that many people actually saw the chair, and of the people who did, not many of them were thinking about it as a potential investment. The flea market’s market is limited by simple geography, only a limited number of people can all be in one place shopping at the same time. The stock market is the opposite. Literally millions of people are watching the stock market every second of every day, and virtually all of them are viewing the stocks as potential investment opportunities. The stock information is all immediately available to everyone, which means the stock price at any given second in time is the right price. There are no ‘good deals’ in the stock market; you can’t buy a stock in one place, spruce it up, then make it visible to a different set of people in a different place who are willing to pay more for it. It’s an entirely different game. When people think ‘good deal’ in the stock market, they’re making a guess about what will happen next, what the news will be later in the day or later in the year. But it’s just a guess. There are no deals or sales or steals in the stock market, and treating the stock market as a side hustle is much more like gambling than investing.
There’s a better way to invest!