Why Invest in the Entire Stock Market?

Investment journey… we all have one or at least we should all have one. Initially my investment strategy started at the age of 19 when I had inherited $5,000.00 after my grandfather had passed away. He held a life insurance policy for myself, of course this never came to fruition. But upon his passing I received a cool sum of money.

Unlike our younger brother who was still in high school and living at home when he stashed his inheritance into a savings account for future use of spending it during college. I spent mine within a week on a 1981 Ford F150 with a 358 Cleveland motor, a 3″ lift and 33″ tires. It was a beast! of a truck. And whilst I spent my inheritance on a truck, my older brother spent his on his lifestyle; clothes, rent, dates, and bills. There was no guidance from our parents on how this inheritance could have been put to work in the stock market and assisted us in understanding the principles laid out in The Latte Factor; A Millionaire’s Investment Strategy.

However had our parents understood the principles of investing in the stock market or compound interest as laid out in the plans by David Bach in the Latte Factor, then those dollar bills would have multiplied over the years if they were out of our reach.

Fast forward a decade and I’ve not learnt about investing in the stock market until I meet a guy named Jay. Jay and I just happen to work at a cell phone shop in the Pacific Northwest. Jay is about ten-years older than I, but he has already had his hands in the stock market. We talk about stocks day and night when there are no customers. We’ve built up a nice little portfolio of blue chip stocks; Apple, Best Buy, Coca-Cola, Chrysler, Ford, and Nordstroms to name a few.

Then one day I decide to apply for University in Australia!

Nearing the date of my departure for life down under, I cash out the portfolio selling everything that I have worked hard to obtain. Money in the pocket and not in the stock market. I’ve now invested in my again in my lifestyle. Had either Jay or myself had a better strategy in the stock markets of 1999, then we would have known those investments could have made us into millionaires by the time we reached our mid-forties.

However that was not the type of investment I was looking for at that time. Instead it was off to see the world. After a decade of traveling abroad and investing in myself rather than the stock market, I’m back to reality that the world has changed its tunes on stock market investing. Today there is crypto-currency, ETF (exchange traded fund), GIC (guaranteed investment certificate), mutual funds and traditional stocks.

Speed forward another decade, after the decade of traveling overseas and I’ve realized there are no funds saved or being invested for our future retirement. This means future me, will be homeless without a means to fund my expeditions.

Then talking to several people I know I’ve come to realize that whilst I was chasing the explorer’s lifestyle and living minimally out of a backpack, these people were amassing a large quantity of debt by having children, buying a house, owning multiple cars, and recreational vehicles (ATV, motorcycle, speedboats) and owning a second home or cottage. The value between our chosen lifestyles were nearly the same. We were both on paper, broke.

They were in the red because of their thousands of dollars of debt, whereas I was broke because I didn’t have any money in my bank account or any paid off assets. On the most basic level of living I was actually winning but it didn’t feel that way.

Hindsight is Twenty-Twenty

Nearly three decades ago, when I received my inheritance, if I knew then what I know today then that $5,000.00 would have become a Million dollars by my forty-fifth birthday and I would be retired from the daily 9-to-5 grind.

However that did not occur.

Instead over the last decade I have been re-learning about investments in the stock market, how to secure a better investment portfolio and how to amass a financial wealth to be proud of.

“Rather than listening to the siren songs from investment managers, investors – large and small – you should instead read Jack Bogle’s The Little Book of Common Sense Investing”

Warren Buffet

After reading books by Dave Ramsey, Andrew Hallman and several others whom talk about getting out of financial debt and getting into investment strategies. I bought the book, The Little Book of Common Sense Investing by John Bogle. I’ve read this book six times. And every time I read it, I gain clarity on investing in the stock market.

In the book The Little Book of Common Sense Investing John writes on page 82, “The winning formula for success in investing is owning the entire stock market through index funds and then doing nothing. Just stay the course.

But how does someone “own all of the stock market“?

Simple.

You build a portfolio based only on Exchange-Traded Funds (ETF). Each ETF is like its own mini Standard & Poor’s 500 (S&P 500). Standard and Poor’s 500 is an index fund made up of the top 500 United States large capital stocks. The current stock price of an S&P 500 share is $4,329.59 USD which is unaffordable for the average person. Even if you wanted to purchase a single share from the Top 10 holdings on the S&P 500 you would have to have a hefty investment of funds. To a total sum of amount $8,375.27 USD.

Stock prices, Sunday April 17, 2022

  1. Apple $165.29 USD
  2. Amazon $3,034.13 USD
  3. Berkshire Hathaway Class B $344.33 USD
  4. Google $2,534.60 USD
  5. JP Morgan Chase $126.12 USD
  6. Microsoft Corp. $279.83 USD
  7. Proctor & Gamble $158.57
  8. NVIDIA $212.58 USD
  9. Tesla $985.00 USD
  10. United Health Group $534.82 USD

Okay for the average investor reading this article, you just grimaced as did I. Perhaps in another month or two with some strategic savings we might be able to buy a few shares of the smaller listed stocks above like Apple, JP Morgan Chase or Proctor & Gamble. But what if there was a better way to purchase these stocks? What if they came as a packaged group, just like the S&P 500, then you could do exactly what John C. Bogle informed, “Invest in the entire stock market.

How Do I Invest in The Entire Stock Market?

The simplest way to invest in the entire stock market is to purchase smaller priced index funds and continue to buy units or shares over a few years time. The advantage is to purchase the units on a monthly basis and never withdraw any funds until you have earned your first Million Dollars.

A few of Exchange Trade Funds which are reasonably priced in CAD and one that mimics the S&P 500 are the following two funds. Both are reasonably priced and both are obtainable.

  • Vanguard U.S. Total Market Index
    • VUN $77.74 CAD
      • Apple
      • Microsoft
      • Amazon
      • Tesla
      • Google A
      • Google C
      • NVIDIA
      • Berkshire Hathaway B
      • Facebook
      • United Health
      • plus 4,054 other companies
  • Vanguard FTSE Canada All Cap index
    • VCN $44.23 CAD
      • Royal Bank of Canada
      • Toronto-Dominion Bank
      • Enbridge
      • Bank of Nova Scotia
      • Canadian National Railway Co.
      • Canadian National Railway Ltd
      • Bank of Montreal
      • Shopify Class A
      • Brookfield Asset Managment
      • Canadian Natural Resources
      • plus 175 other companies

The utmost strategy for any investment is to put the money into investments that will yield you an annual return of over eight-percent annually. Also you need to strategize your investment plan as well as a retirement plan.

The key to longterm investment work is to place your money into strategic investments with a low risk and a high yield then let that compound over several decades until you are ready to retire. Whether your retirement is mainstream 63-years old or if you are looking to follow the FIRE movement (Financially Independent Retire Early)!

The choice is yours.

~ Aaron JacksonCrabb

Note: When you purchase something after clicking links in our articles, we may earn a small commission. Read our affiliate link policy for more details.