Investing has become an increasingly popular activity in recent years, with more individuals looking to put their money to work. There are several key reasons driving this growing interest in investing among the masses. Firstly, historically the stock market has generated strong returns over long periods, making it an attractive avenue to grow one’s wealth. Secondly, technological innovations have made investing more accessible to retail investors through user-friendly investing apps and near zero-commission brokerages. Finally, greater awareness of the power of compounding has led many to start investing early to harness this ‘eighth wonder of the world’. When asked why they are interested in investing, individuals can highlight some of these core drivers fueling the secular trend.
Wealth creation through market’s historical growth
As per data, the S&P 500 has delivered an average annual return of around 10% since its inception in 1957. These attractive historical returns form the bedrock of interest among many new investors who hope to grow their capital by participating in the long-term wealth creation capacity of markets. However, past performance does not guarantee future returns and investors should have reasonable return expectations aligned to their risk appetite.
Accessibility enabled by fintech innovations
The investing landscape has been completely transformed by fintech disruptors such as Robinhood and WeBull, which allow individuals to trade commission-free on their smartphones. This ease of access coupled with slick interfaces has hooked millenials and made participating in markets just a few clicks away. However, merely having access does not guarantee positive returns and investors should focus on building knowledge before deploying capital.
Awareness of the power of compounding
The remarkable effects of compounding interest over long periods is coming into sharper focus. Starting early allows investors to harness this eighth wonder of the world to accumulate a large investing corpus by retirement. However, having a long-term horizon alone is insufficient, individuals need to employ sound investing strategies and have the discipline to hold quality assets.
In summary, the allure of attractive historical market returns, accessibility enabled by new-age investing platforms, and growing awareness of compounding interest are fueling rising public interest in investing. However, participating successfully in markets requires much more than access and optimism.