Have You Ever Considered Staying Away From The Stock Market?

By: ispeculatornew
Date posted: 04.04.2012 (5:00 am) | Write a Comment  (6 Comments)

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ou might know Mark Cuban, Tim Ferriss, or someone else in your family or friends that decided to stay away from investing in the markets. There are probably a million different reasons for doing so and as you can imagine, I’m far from convinced myself. However, if you think about it, I’ve said myself that the best investment I ever made was in my online company. In second place would probably be the fees that I incurred to invest in myself (exams, school, etc).

Alternatives To Stock Market Investing

Biz: Clearly, for someone like me who owns a business, it makes sense to reinvest a lot there. For many types of businesses (including my own), the returns can be much higher than I could possibly expect or even hope to get from the market

Real Estate: A few years ago, many would have said that real estate prices were much more stable and many believed they did not ever decline. Clearly, that has been proven to be very wrong. Still, owning a real estate is generally much more stable and provides great diversification.

Commodities: I’ve talked about buying physical gold or metals, and how much traction this has gained in recent years. Clearly, holding commodities is one option that many go for.

Investing in yourself: Would the 10K that you invest in the markets pay off more if you took a class, decided to learn a particular skill.

Investing in people you know: Even if you do not have a business, you probably know others who do. Guys like Mark Cuban and Tim Ferriss put a lot of their money in private investments, investing in friends, contacts or even relative unknowns.

Why Would You Stay Away From Markets?

There are of course many different reasons but I would say that in general it would be because you do not believe in the fundamentals of the market, and/or you expect to be able to get higher returns in your own investments. I read an interesting post about this specific subject last week and he said that as Buffett had recommended, he was staying away from anything that he could not understand. In a sense, that makes it difficult to buy a share of most companies. How would you know how aggressive they are with their accounting, if any fraud is happening, etc. It is much easier for me to look at my business or real estate that I own and determine the true value.

Not As Easy To Do As You’d Think

Sure, guys that have millions of dollars can find a lot of opportunities to invest in smaller and bigger private companies (god knows I’d love to buy Facebook shares) but for most of us, it’s much more difficult. Investing $10,000 or $20,000 in your own business will work fine, but many businesses will see it as too much trouble for such an amount. It also becomes very difficult to get diversification. If you have your entire savings in one business or one big building, you do have some risk involved.

So No, I’m Not Turning My Back Away From

Obviously, I’m still very much a believer in the markets and do plan to invest much of my savings in the markets but I am already reinvesting part of what I can into other assets such as my own business and I hope that will continue and even accelerate in coming years.

What are your thoughts on staying away from the markets?

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6 Comments

  1. Comment by KB — April 4, 2012 @ 7:41 am

    There are answers, there are decisions, there are opinions and there are discussions. Though I do not think it necessary to stay completely away from the market, neither does a person have to be “all in” either. Diversification and Asset allocation can take on many forms and the market is just one piece of a well balanced portfolio. Investment in stocks, bonds, commodities, business, self and other will produce the means to make it to the end. Some speak of a three legged stool (work, stock, bonds). I think the stool should have many more legs than suggested.

  2. Comment by IS — April 4, 2012 @ 6:02 pm

    @KB – very well said, it’s false to say that you’d need to choose one or the other, a diversified combination can be the best way to get it done

  3. Comment by Robber Baron — April 4, 2012 @ 10:42 pm

    Another option is timing. Once again this need not be all or nothing, fully-out or heavily-in. One can time buys in the Stock Market, in Bonds, CDs, real estate, etc. I’ve dialed back my monthly investing purchases recently as the market seems very high (DJI 13K). Sure, it could go up 20% in the next six months. Sure, it might not get much lower for the next 10 years. Point being, we can buy less or hold less for a while without quitting.

  4. Comment by IS — April 5, 2012 @ 3:10 am

    @Robber – Interesting strategy, I personally try to stay away from trying to time the market in my long term retirement account, but it can certainly pay off if you do well.

  5. Comment by Kok Leong — April 5, 2012 @ 10:03 am

    Diversification is always the best choice.
    Personally i lean more towards real estate as it takes the emotions out unlike stocks, which emotions play a big part in

  6. Comment by IS — April 6, 2012 @ 6:46 am

    @Kok – Not a bad idea for sure:)

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