Investing in Stocks – How to Build Wealth When Money Loses Value

Time to break the myths

If your first association with the word “stock market” is guys in suits yelling into headsets – don’t worry, you’re not alone.

And if you think the stock market is only for the rich or for MBA-toting finance geeks – there’s no shame in that either.

But ask yourself one question:
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Do you want to keep living paycheck to paycheck, or finally understand how real capital works?

Stock market – what is it anyway?

Imagine a marketplace. Like a bazaar, but instead of apples, shares of companies are sold. That’s the stock market – a place where you buy pieces of companies (called stocks).

It’s not a casino. It’s not gambling. It’s ownership.

When you buy shares of a company listed on the stock market, you’re not just hoping for profit – you actually own a fraction of that company. Real ownership. Along with all the rights that come with it, like participating in general meetings, the right to a share of the company’s assets if it’s liquidated, and most importantly – a share in the profits – dividends.

You simply become a co-owner of the company – a shareholder.

What are dividends and why do companies pay them?

A dividend is a portion of a company’s profit that the company shares with its shareholders. When a business performs well and earns profits, it has a choice: it can reinvest that money into growth or distribute part of it to its owners – the shareholders. This includes both the major ones sitting on the supervisory board and the small investors holding just a few shares in a brokerage account somewhere across the world. If the company’s management decides to pay a dividend, each share receives exactly the same amount. This is how dividends are paid out.

For the company, it’s a signal to the market: “We are profitable. We are stable. We share our profits.”

‍Regular dividend payments attract long-term investors, increase trust in the company, and can positively influence the stock price. Companies that not only pay dividends but do so consistently over years and regularly increase them are especially valued. This is a sign of financial health and business maturity.

Stocks – how to earn like an owner, not an employee

Working a regular job, you earn once – by selling your time.
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Buying stocks, you earn when the company grows or pays dividends (shares its profits), and its market value increases.
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It’s like being a silent partner – the company works, you sleep, and the money can still come in. Sounds like a fairy tale? It’s the reality for people who’ve figured this out. You don’t have to be a business shark or handle millions to get started. Just pick a company whose products you use, know, and like.

Imagine this:

30 years ago (January 1985), your father or grandfather was sipping a Coca-Cola, loved the taste, and decided he wanted to become a part-owner of the company. At that time, the price of one share (a fraction of the company) was $1.50. Today, in January 2025, the price has surpassed $70. If he had invested $1,000 of his savings in something he liked and believed in, today he would own shares worth over $50,000 – and along the way, for 30 years, he would have been receiving steadily growing dividends every quarter.

Coca-Cola is a company that has paid dividends consistently for decades – and not only paid them but increased them every year. This means each payout was bigger than the last, even if the share price temporarily dipped.

In practice? A shareholder who received $20 a year in dividends in the 1980s might now be getting over $600 annually from that same investment – and that’s only from dividends, without selling a single share. It’s like the investment started paying a “salary” that grows the longer you hold it. – Real passive income and a path to financial freedom.

It’s not magic. It’s the power of time, patience, and the growth of company profits – from a business that sells billions of bottles every day worldwide. And that’s what separates an investor from a speculator: the investor plays the long game. The speculator chases quick wins. True wealth, as Coca-Cola shows, is built quietly – with persistence.

What are stock market indexes and why is it worth starting with them?

A stock market index is an indicator that measures the value of a selected group of companies listed on the stock exchange, usually the largest and most representative for a given economy or sector. In practice, this means that by watching one index, you follow the overall health of the entire market – instead of analyzing each company individually.

For example, the S&P 500 index includes 500 of the largest companies listed on American stock exchanges, such as Apple, Microsoft, Amazon, and Coca-Cola. It’s like a thermometer for the market – if the index is rising, it means most big companies are doing well.

Why is this important? Because indexes provide a broad perspective and teach you to look at the market as a whole, not just through the lens of individual companies. Beginner investors often make mistakes driven by emotions, lack of knowledge, or blindly following trends. By focusing on indexes, you eliminate the need to make quick, impulsive decisions. If one company in the index loses value, others may balance it out. The risk is diversified – and that’s a huge advantage.

Also remember, an index shows not only the market’s current state but also its direction over the long term. Historically, most major indexes – like the S&P 500 or MSCI World – have grown alongside economic development, despite occasional downturns. This makes them an excellent starting point for learning how to invest.

Stock market indexes are:

• Understandable (it's easy to see which companies are included),
• Objective (they’re created based on clear, predefined rules),
• Useful (they help you track and analyze markets),
• The foundation of many investment strategies (many large funds invest in entire index groups).

For beginner investors, indexes are like a map – they show you where you are, where you can go, and what the possible paths look like.

By starting with indexes, you not only build a strong foundation of knowledge but also learn to think long-term – and that’s one of the most important habits in the world of investing.

Alright, but why stocks and not something like Bitcoin?

It’s simple – you want to invest, not speculate.
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An investment is something that generates profit over time and is backed by real value.
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Speculation, on the other hand, means buying something and hoping someone else will pay more for it later.

Investors have a name for this mindset – the “Greater Fool Theory.”
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It’s a situation where you don’t really know why you’re buying something – you gain no real benefit from owning it but you’re betting that someone else will be an even “greater fool” and buy it from you for more in the future.

Investment assets like company stocks gain value over time because businesses grow, serve more people, and create real economic value.
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Even better? Many of them pay dividends, sharing profits directly with shareholders.

What about real estate and bonds?

A good investment is one that works for you while you focus on your life.
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Real estate – especially when owning multiple properties – often becomes a full-time job.
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Sure, property can increase in value over time, but to even try to keep up with the performance of stock indexes, you need to actively maximize returns. That means not just long-term renting, but also short-term, seasonal rentals, plus renovations, maintenance, cleaning after tenants, and more.
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This is a job for a property management company and a team of people, not an individual investor trying to build financial independence.

Bonds, on the other hand, offer interest rates that barely beat inflation – and those returns are fully taxed.
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This means you gain very little, or still lose money in real terms, just a bit more slowly.
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It’s a similar story with savings accounts or term deposits.

Why should a young investor start now?

A young investor’s greatest ally is time.
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Thanks to the power of compound interest, your investment gains start generating even more gains over time. The earlier you start, the more you can build – even if you begin with small amounts.

Example:
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If you invest $200 per month for 30 years with an average annual return of 8%, you’ll end up with around $280,000.
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But if you start just 10 years later, you'll have only about $120,000.

You can read more about compound interest in THIS article (link).

Why is it better to invest instead of keeping money in a bank account?

‍Because the value of your money decreases over time. What you can buy today for $100 might cost $120 in a few years – not because everything new is more expensive, but because money loses its purchasing power. This is called inflation, and it affects all of us – even if we don’t notice it in everyday life.

You can learn more about what inflation is and how it works in THIS (link) article.

Investing is not a privilege. It’s a necessity.

In a world where money loses value every year, not investing is the risk – not the other way around.
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The stock market isn’t reserved for millionaires. Thanks to technology, today anyone – even a student or a young worker – can become an investor.
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It’s a decision that changes your life.
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Not immediately. But forever.

Ready to start?

You don’t need to understand everything right away. You just need to take the first step:

• Open a brokerage account (you can check out our partner’s - Freedom24 - offer HERE*)
• Choose a company or an index.
• Make your first deposit.
• Buy your chosen assets.

This is not a magic formula for millions.
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It’s the beginning of your path to independence, peace of mind, and real prosperity.

How to start investing in the stock market? (a simple plan)

• Open a brokerage account – for example, check out our PARTNER*. It’s free and takes just a few minutes.‍
• Start by choosing an index – a collection of a certain type of companies, e.g., from the same country, similar size, or the same industry or sector.‍‍
• ‍Invest regularly – for example, $300-500 per month. Don’t try to “time” the perfect moment. Consistency works wonders.‍
• Learn – read our other articles, watch the market, and look for information. Don’t start with complicated industry-specific topics; grow your knowledge gradually and seek reliable sources.

Summary:

• Inflation eats away at your savings.
  Keeping money in a bank account is a real loss – year after year, you can buy less and less with it.
• Investing is a way to build wealth, not a luxury only for the rich.
  Even small amounts, invested regularly, can grow into a solid capital over time.
  
• By buying stocks, you become a co-owner of a company.
  You earn when the company grows, pays dividends, and increases in value.
  
• Time works in your favor.
  Thanks to compound interest, the sooner you start investing, the greater the effect – even with small amounts.
  
• Investing in indexes is a good start.
  They provide broad market exposure, spread risk, and don’t require specialized knowledge.
  
• Speculation is not the same as investing.
  You invest in something that truly creates value and generates profits. Don’t count on a “greater fool” who will buy something from you at a higher price for no reason.
  
• Don’t wait for the perfect moment – start now.
  Consistency and a long-term perspective are more important than perfect timing.
  
• It doesn’t have to be difficult.
  Open a brokerage account, choose an index or a stable company, start with small amounts, and learn along the way.

Investing in stock exchanges and financial markets is one of the ways to grow your money. It’s no coincidence that this path is chosen by people with significant wealth, as well as by those who have built their fortunes through well-thought-out decisions. The Freedom24 platform offers the opportunity to embark on this journey and discover how the world of investing works.

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