In the past week, I’ve received several messages about the situation of the stock market. I can see that people are confused and some are even panicking due to the COVID-19 pandemic, which is why I decided to address such concerns in this week’s episode.
Coming to the current situation of the stock market, as John Bogle would put it, “nobody knows nothing” this means that we can never know for sure which way the market will go. Many experts predict what will happen with trends, sometimes that’s what happens, but other times, it’s not. Therefore, according to successful investors, you should follow this strategy: invest for the long-term regularly, meaning that instead of waiting for a downturn or a boom, invest whenever you have the money.
So, what’s the best way to invest? I’ve been saying this again and again: through mutual funds. This way, you can create a portfolio of top-rated stocks in the U.S and globally, let your money earn for itself.
But before investing, it is important to understand the following terms:
Investing: committing your money somewhere with a reasonable expectation of earning an income/profit. The chances of losing your money is high, although the chances of making money is also quite high I would say you have 50/50 chance. Moreover return on investment can be done with proper research and planning.
Speculating: when you calculate risk, but you are uncertain about what the outcome will be. There’s moderate risk involved, but there’s also an expectation of gain. Speculation is usually done in long-term investments.
Gambling: when you wage your money into an event where there is no certainty and a high risk of failure but a chance of winning big as well (depending on your luck). However gambling is haram, and certainly not allowed in Islam.
It is important to understand the differences between these terms as it will help us make better decisions. The most feasible option out of these is investing, which will allow you to earn an income in the long-term. Yes, in the short-term, you might incur a loss but in the long-run, investments are almost always profitable.