THE TIME VALUE OF MONEY
|
|
When I was in college and studying managerial accounting, I hated it. It was incredibly boring and I believe that is why many people fundamentally do not understand it nor the stock market and why it always wins even after such tremendous looses.
Mark Warner of Virginia was right on the money when he stated that George W. Bush simply has no vision. After 911, GW had the perfect lead into call the country to arms and ask us to conserve energy. Ask us to invest in America by buying stocks or savings bonds. But that is not what he did, he asked us to go out and buy big screen televisions. He asked us to purchase homes we could not afford, cars we did not need.
Now the chickens have come home to roost. The problem is that the American people do not fundamentally understand what is happening right now and what it will take to get out of this. I am guilty of this too or else I would be a millionaire.
First and foremost you must have confidence in America. We will not fail and we are down right now but we will get back up.
Second, money that you have right now will be worth more tomorrow. Even if you have invested in 100 dollars in the stock market today, and the market goes down and for several months, that 100 dollars is only work 50, the market will go back up and in time, that 100 dollars will be worth 1000 dollars. It always goes up over time.
Third, investing in the stock market in a sense is like having faith in God. I know this is a stretch of a comment but here me out. In order for the time value of money principle to always be right and to work, there had to be some precedence or evidence that money today will always be worth more tomorrow. That that precedence is time. If you trend the markets over time, the market tends to be more bullish (good) than bearish (bad). Why? Because of consumer confidence, having faith in the free market system.
I realize that after last week, it is very difficult to have faith in a system that is so riddled with corruption and greed, but the alternative will make us a third world country. So the moral of this pain that we are seeing is that we are going to have to save more and invest more. Expect steady 6% returns on investments instead of 16% returns on investments. People are going to have understand that what goes up must come down even in the market place because we are running on scarce resources. There is not an infinite supply of resources in this world. They are finite. But to not have faith in the free market system, to not continue to invest in this system of ours, no matter how flawed it is, will make us something many of us are afraid to face: No longer the leaders of the free world!
Mark Warner of Virginia was right on the money when he stated that George W. Bush simply has no vision. After 911, GW had the perfect lead into call the country to arms and ask us to conserve energy. Ask us to invest in America by buying stocks or savings bonds. But that is not what he did, he asked us to go out and buy big screen televisions. He asked us to purchase homes we could not afford, cars we did not need.
Now the chickens have come home to roost. The problem is that the American people do not fundamentally understand what is happening right now and what it will take to get out of this. I am guilty of this too or else I would be a millionaire.
First and foremost you must have confidence in America. We will not fail and we are down right now but we will get back up.
Second, money that you have right now will be worth more tomorrow. Even if you have invested in 100 dollars in the stock market today, and the market goes down and for several months, that 100 dollars is only work 50, the market will go back up and in time, that 100 dollars will be worth 1000 dollars. It always goes up over time.
Third, investing in the stock market in a sense is like having faith in God. I know this is a stretch of a comment but here me out. In order for the time value of money principle to always be right and to work, there had to be some precedence or evidence that money today will always be worth more tomorrow. That that precedence is time. If you trend the markets over time, the market tends to be more bullish (good) than bearish (bad). Why? Because of consumer confidence, having faith in the free market system.
I realize that after last week, it is very difficult to have faith in a system that is so riddled with corruption and greed, but the alternative will make us a third world country. So the moral of this pain that we are seeing is that we are going to have to save more and invest more. Expect steady 6% returns on investments instead of 16% returns on investments. People are going to have understand that what goes up must come down even in the market place because we are running on scarce resources. There is not an infinite supply of resources in this world. They are finite. But to not have faith in the free market system, to not continue to invest in this system of ours, no matter how flawed it is, will make us something many of us are afraid to face: No longer the leaders of the free world!
