Why Passive Investing Can Be Dangerous to Wealth

I wrote an article recently on my adventures in Stock Market investing and my current success over a short space of time. As it stands, my account is sitting at a whopping 12% growth after just seven weeks invested.

This is why the rich keep getting richer!

While I’m aware the value of my portfolio could drop during a downturn or even a stock market crash. I’m also equally convinced I’ll be enjoying retirement with a lot more money than I ever thought it possible to have.

Hmmm … he’s A bit overconfident if not rather arrogant, I hear you say.

Well, I’m going to stick my neck out here and say I don’t think I am. I believe anyone can make good money in the stock market, especially if you’re still young. In fact, becoming a millionaire in a twenty or thirty year time frame is almost inevitable if you begin now. But there are two VERY important rules I believe we should stick to in order to do it …

The first is obvious, but one that is frequently ignored by many, including me of course …

Getting out of Debt!

Apart from the roof over your head, there is nothing we should be doing to increase debt. I’m sure Credit card bosses love the stock market too. But it will be with your hard earned money they use to invest. So stop giving it to them through their extortionate interest payments and keep it for yourself.

Yes, I know it can be really hard and believe me I’ve been there. But if escaping credit card debt means having to eat baked beans and read by candlelight for a while, then so be it. Once you get into the position of having some disposable income, you will be able to put your money to work and focus on generating wealth. Which brings me to my second rule, and the main crux of my article …

DO NOT PASSIVE INVEST!

We live in an age when learning about subjects like Stock Market investing often come to us from online sources such as social media. Being new to investing myself, my first go-to was the plethora of YouTubers vlogging about the Stock Market. Now, while they all seem very knowledgeable (and I’m not saying that they aren’t) Something just didn’t sit quite right with me.

Practically every single vlogger I’ve watched, seems to say the same thing repeatedly. It appears to be some kind of YouTube investing mantra that only they fully understand (although many of them admit to having no qualifications in finance whatsoever)

They say that all you really need to do to become wealthy is to ‘PASSIVE INVEST.’ To add your money week by week into an investment fund (ETF) full of stocks you’ve never heard of, then let them do the work for you. You don’t even need to look at them. In fact, they say looking at them is a really bad idea, because if you see them drop you might just panic and withdraw at a loss.

But I don’t agree!

The term ‘Passive’ juxtaposed with the word ‘investing,’ should give us a clue as to why it might not be the best way to generate wealth at all. I mean, why would you spend your hard earned money by throw it willy-nilly into something you know absolutely nothing about?

If I had succumbed to this sure-fire way of ‘beating the value of the stock market over time’, my own thoroughly researched portfolio would not be sitting at a 12%+ gain. Instead, I would be sitting with some weird fund full of stocks I know nothing about, wondering why it’s is still sitting at just one or two percent up, or down.

In my opinion, good investing is no different than being a good writer. If you don't put in the work and learn the knowledge required to make things grow, then it’s highly likely nothing very exciting will happen. I don’t know about you, but I don’t really care about being wealthy when I’m too old to enjoy it. I have big plans ahead!

It is my intention to write a lot more about my investing experiences as I continue my journey. I believe that generating personal wealth from Stock Market investing is something that many of us can achieve. Why should it just be the rich that are rich after all.

Stay Active. Not Passive!

Thanks for reading

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Disclaimer: these are my personal opinions and should not be regarded as professional financial advice. I encourage you to seek guidance from a licensed financial advisor for your specific situation.

Originally published at https://medium.com/never-stop-writing/why-passive-investing-can-be-dangerous-to-wealth-21d97a426a15