Why Investing in Stocks Is a No-Brainer

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By Jacob Maslow

index funds 3d letteringThere are two ways to play the stock market. You can either just buy index stocks and leave them alone, or you can look for hot stocks with either momentum, growth, or potential. Using a wide variety of investment styles ranging from momentum trading, threshold trading, volume trading, day trading, to fundamentals trading, you can even get a return that beats the overall market’s return.

However, according to a recent study, you probably would have done much better over a long period of time if you simply just bought a basket of stocks based on the S&P 500. That’s all. That’s all you need to do. It may seem like a no-brainer. It may seem deceptively simple. But, according to the study, that is all you need to do to enjoy superior returns compared to how other investors play the stock market.

You have to understand that chasing a great return involves many processes. First, you have to find stocks that have a high chance of appreciating. This can take quite a bit of work. Second, you have to pick stocks that the market may have underappreciated or undervalued. The whole point is to beat the overall market.

Third, and this is the trickiest, is to enter and leave the stock at the right time. A lot of your stellar returns might actually be flushed down the toilet if you exit the stock at the wrong time. In short, you hung on to it for too long. Considering all the heavy lifting and uncertainty involved with chasing stellar returns, it is a better idea for conservative investors to just simply the buy the S&P 500 and let it ride.

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