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Why the market Is good — even in bad times

Here’s why Wall Street is so out of sync with Main Street:

  1. Small businesses are struggling, but they aren’t represented on stock indexes.

When you hear the stock market had a good or bad day, they’re talking about the major stock indexes like the Dow Jones Industrial Average, the S&P 500 and Nasdaq. These track the stock prices of America’s biggest corporations.

“But guess who’s not represented in a stock index? Your local baker. Your favorite watering hole. The guy who cuts your hair. Your child’s preschool,” says Robin Hartill, a certified financial planner and a senior editor and financial advice columnist at The Penny Hoarder. “Small businesses have laid off more people than larger companies.”

  1. The stock market only tells us what investors think will happen.

The stock market isn’t a snapshot of where we’re at. It just tells us where investors think we’re heading. Soaring stock prices show that investors think companies can make money moving forward.

  1. Investors think we’ll have a quick V-shaped recovery.

States have reopened. There’s optimism about a coronavirus vaccine. Many investors think those factors will give us a V-shaped recovery, meaning the economy will shoot right back up after crashing.

  1. Amazon, Apple and other tech giants mask reality.

Amazon, Apple, Microsoft, Facebook and Google parent company Alphabet account for more than 20% of the S&P 500.

“That means when stock prices for these companies soar, it can mask the struggles of smaller companies whose stock prices haven’t recovered much,” Hartill says.

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What’s a typical investor supposed to do?

“The smartest thing you can do is to budget a certain amount to automatically invest each month, regardless of what the market is doing,” Hartill advises.

One way to do that: Use an investment app that offers an easy, automatic way to start investing.

We like Stash because it lets you choose from hundreds of stocks and funds to build your own investment portfolio.

But it makes it simple by breaking them down into categories based on your personal goals. Want to invest conservatively right now? Totally get it! Want to dip in with moderate or aggressive risk? Do what you feel.

Plus, with Stash, you’re able to invest in fractions of shares, which means you can invest in funds you wouldn’t normally be able to afford, like Amazon, Google or Apple, for as little as $1.* The best part? When these companies profit, so can you.

If you sign up now (it takes two minutes), Stash will give you $5 after you add $5 to your invest account. Subscription plans start at $1 a month.**

* For Securities priced over $1,000, the purchase of fractional shares starts at $0.05.

** You’ll also bear the standard fees and expenses reflected in the pricing of the ETFs in your account, plus fees for various ancillary services charged by Stash and the custodian.

The Penny Hoarder is a Paid Affiliate/partner of Stash. Investment advisory services offered by Stash Investments LLC, an SEC-registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting or tax advice. Investing involves risk.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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Founded in 2010, The Penny Hoarder is one of the nation’s largest personal finance websites. Its purpose is to help people take control of their personal finances and make smart money decisions by sharing actionable articles and resources on how to earn, save and manage money.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.