"Playing with the stock market is like playing chicken with a freight train... no matter how many times you win, you only get to lose once."  -- Mike Masters, profiled in Stock Market Wizards: Interviews with America's Top Stock Traders

If you've been on planet earth over the past week, you've noticed stock markets around the globe putting on their always untimely vanishing wealth act. It's never a good time to lose money, and losing it in the stock market presents enormous challenges.

Here's what I mean...

Suppose you're fortunate enough in one year to make a 20% gain and suppose you're also unfortunate enough to get handed a 20% loss in the following year. What's your average percent gain?

Well... (+20 plus -20 is 0) divided by  2 is 0%.

You have a 0% average gain... but... did you lose money?

Yup. And it doesn't matter which order the gains or losses occurred.

For example, suppose you start with $1000. If it grows by 20%, you now have $1200. If $1200 now falls by 20%,  you're left with $960.

Do this math the other way, with the loss occurring first, and you're left with this same $960.

Even though your returns averaged 0%, you lost money!

Stock market investing by it's very nature creates gains and losses. In order to make money, your gains must overcome losses plus taxes plus fees plus inflation. Unless you're very, very good... and lucky... you're probably better off pursuing other wealth building strategies.

Yes. I'm aware of historical averages. I'm also aware that it's mathematically impossible for the average investor to achieve them. Why? Because historical averages don't pay taxes or fees, aren't adjusted for inflation, and aren't trapped by untimely vanishing wealth acts.

Rapid debt elimination is one wealth building strategy which never has an untimely vanishing act. It's tax free wealth creation. There are no fees or commissions. And inflation is either a non-factor or works for you.

After you're Debt-Free, how do you continue to build wealth, for say, retirement?

This, of course, depends on individual preference and needs. But, rest assured, if you're not burdened by a mountain of debt going into retirement,  you'll need less wealth. Which means you can probably invest in something that lets you sleep at night.

Are you investing in the stock market inside or outside of your retirement accounts either directly or through mutual funds -- while you're in debt? If so, why?

-------------------
Greg Moore is the Creator of the Wealth Building System
'DebtIntoWealth -- Lessons from My Journey to Debt Freedom'

   "My husband is due to retire from the Navy in just two
    years at a young 42 years old, and right around then,
    using your system, we'll be completely debt free, which
    means  we could literally never have to work another day,
    if we choose."    -- Andrea Davis, South Korea

Share my Special Report with friends now:
http://www.debtintowealth.com/specialreport

Good points, Greg, thanks! I was just reading some commentary on the recent stock market acrobatics and wondered the same thing. Too many people will never make enough on stocks in the long run to pay the interest on their debt. Doesn't make sense to me. 

Pat:

Too many people will never make enough on stocks in the long run to pay the interest on their debt

Hi Pat, 

Thanks for including the Interest on debt as another hurdle to overcome in addition to Taxes, Commissions, Fees, Inflation, and Losses for stock market investors. This makes profiting in the stock market even more daunting. It's interesting to note these are all GUARANTEED profit reducers. There are NO guaranteed profit increasers. Talk about a stacked deck!

On the other hand, pay off a 24.9% debt-card and you're guaranteed to earn 24.9%.

Greg Moore:

these are all GUARANTEED profit reducers. There are NO guaranteed profit increasers. Talk about a stacked deck!

On the other hand, pay off a 24.9% debt-card and you're guaranteed to earn 24.9%

That makes so much sense. Why is it so hard for people to see?  

 For me, I need to have people like you two posting about his type of mathmatical investing as I am not good with numbers and avoid these topics.  "A perfect victum."   Your explanations are perfect for me as they are easy to understand and remember.  And I know I have a reference to go back to here on this forum that fits into my realm of understanding and gives me financial peace of mind.  ; )

Pat:

Greg Moore:

these are all GUARANTEED profit reducers. There are NO guaranteed profit increasers. Talk about a stacked deck!

On the other hand, pay off a 24.9% debt-card and you're guaranteed to earn 24.9%

 

That makes so much sense. Why is it so hard for people to see?  

Hi Pat,

I think it's because stock market investing is exciting, chic, and misery loves company.

Paying of debt is boring, counterculture, and you're frequently the only one at the cocktail party doing it.

Greg

Greg Moore:

Pat:

Greg Moore:

these are all GUARANTEED profit reducers. There are NO guaranteed profit increasers. Talk about a stacked deck!

On the other hand, pay off a 24.9% debt-card and you're guaranteed to earn 24.9%

 

That makes so much sense. Why is it so hard for people to see?  

Hi Pat,

I think it's because stock market investing is exciting, chic, and misery loves company.

Paying of debt is boring, counterculture, and you're frequently the only one at the cocktail party doing it.

Greg

You're right; if all one has to talk about money-wise is getting out of debt, that makes one a dull conversationalist - but only in some circles!   To me, it's exciting when I hear of someone getting completely out of debt.

Good post!

We are paying down 22k debt aggressively--40% of our net income or $1500 go toward it monthly plus any extra we "find" through selling stuff, etc.  That said, my dh has a 5% mandatory retirement investment BUT his employer matches it 2:1.  That is a sweet deal.