Why Everyone Should Own Stocks?

I believe everyone should own individual stocks, even if it’s only in small amounts.  Why?  I’ll give you three reasons (in a handy format bullet-point list):

• It’s easy:  Lots of people have a tendency to be a bit “deer-in-the-headlights” when they contemplate buying an individual stock.  But besides that fact that it’s ridiculously simple to start buying stocks in an account from an online brokerage like E*Trade (remember those baby commercials), the whole process of understanding an investment becomes much easier when you put real money on the line (small increments when you start, please).  If you are like me, the best way to learn is by doing (including occasionally losing money).  So get in there and start.
• You will understand the “market” better:  At the end of the day, the stock markets are just exchanges where folks buy and sell little bits of businesses every day.  Despite all the ink (as well as tears) spilled on the subject, stock markets are really simple.  The psychology of the markets is not simple, or rational, or even comprehensible in the short term.  But watching how an investment in a company that you understand, bobs its way through the white water that is the daily stock market can be a great way to learn how the market and your investment works.  And it can be oddly comforting to see your investment move over time with (and sometimes against) the overall market.

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• Your expectations will be more realistic:  For most of us, a significant portion of our overall wealth will be invested in stocks, weather passively through index funds, or actively through mutual funds (yes, even through your pension fund).  These investments derive their value from participating in free (or mostly free) market economies in capitalist societies.  Understanding an individual investment gives you a deeper appreciation for what the markets can and cannot achieve.

So there you have it, my totally biased view of why everyone should own, at least some, individual stocks.  Feel free to let me know if you agree or disagree!