10 Reasons Every American Adult Should Invest in the Stock Market

Investing can be daunting for many reasons. Stocks, index funds, and exchange-traded funds (ETFs) go down all the time, and the market has been extremely volatile, especially since the beginning of the pandemic in 2020. Furthermore, most people are investing money they will need in the future, and nobody can predict the future. That said, 62% of Americans reported owning a stock in 2025, according to a Gallup poll. Here are 10 reasons every American adult should invest in the stock market.

1. You can save for retirement

The main reason most retail investors buy stocks, index funds, or ETFs is because they want to start saving for retirement. I don't need to tell anyone that life is expensive when you consider the cost of paying a mortgage or rent, food, transportation, and clothing, among many other expenses. These expenses can eat up a large portion of your paycheck, which is why people need to think about ways to grow their wealth over time. Investing allows people to do this while they work and sleep.

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2. It doesn't have to be overly risky

Most investors have likely read stories about people investing in meme stocks like GameStop back in 2020 or some small cryptocurrency that no one has ever heard of. Rarely, someone does strike it big, but often, people end up losing their money on these high-risk trades. That roller coaster ride certainly isn't for everyone, and rightfully so, because many people need every last dollar they can save and can't afford to make overly risky bets. Luckily, investing can be quite boring if you invest in an index fund or ETF that buys a basket of diverse stocks set up to generate steady returns for patient investors that stay invested for years if not decades.

3. The S&P 500 has a good track record

Many investors with a long-term horizon invest in the broader benchmark S&P 500 index. According to data from Berkshire Hathaway, the S&P 500 has generated compound annual gains of 10.4%, including dividends, between 1965 and 2024, for an overall gain of 39,054%. That means $1 invested in 1965 would be worth $390.54 now. While the S&P 500 can be volatile on a short-term basis, the longer one stays invested, the more likely they are to make money. This is generally because long-term investors aren't trying to time the market, so they ride out generally short-term downturns and profit from recoveries.

^SPX data by YCharts

4. You can remove the concentration from the S&P 500

Now, investors may be concerned that the S&P 500 is too heavily concentrated by a group of stocks called the "Magnificent Seven,"+ meaning diversification in the broader benchmark index is less than it used to be. This is true. A group of large companies specializing in tech and artificial intelligence have taken the market by storm. Stocks like Nvidia and Apple now have market caps well over $1 trillion, a feat that used to be unthinkable. For investors who want to avoid this concentration, there are ways to buy an equal-weighted S&P 500 fund that removes the weighting of each stock.

5. The power of compounding is real

Investing requires patience, but if you trust the process, you'll realize that you can accumulate more wealth than you may have ever thought possible. This is due to the power of compounding. For instance, let's say you're just starting your career and don't have a lot of spare cash to invest but manage to scrape together $500. If you invested that money in the S&P 500, assume long-term historical returns of 10.4%, and add just $100 to your portfolio a year for 30 years, that initial $500 will grow into over $27,000. All you have to do is wait patiently. Also, as your career advances, you will likely have more disposable cash to invest, which will significantly enhance your returns.

6. You lose purchasing power by letting money sit idle

Now, a lot of risk-averse people may simply care too much about their money to trust the market, and I can certainly understand this sentiment. Unfortunately, keeping money in a checking account that doesn't earn anything will actually lose you money. This is because of inflation, in which consumer prices generally rise over time. Just think about how much prices have risen from before the pandemic in 2020 to now. If you kept your money in a checking account, its value stayed the same, but the price of pretty much everything else rose, leading to a loss of purchasing power.

7. There are often tax advantages

Many people are investing through an individual retirement account (IRA) or a 401(k) through an employer. In these cases, the U.S. tax code actually allows people to deduct a certain amount of contributions from the income they earn that will be taxed, leading to a lower tax bill. The limits in 2025 for an IRA are $7,000 per year for those under 50 and up to $23,500 for a 401(k). It can definitely make a difference.

8. You can find the strategy that's right for you

There's more than one way to invest. Some people buy large, very safe blue chip stocks; some buy stocks for their dividends; and some are more aggressive and make risky bets, hoping that one big win will make up for all the other losses, similar to a venture capitalist. The point is that you can invest in different strategies, sectors, regions, etc. Speaking to a financial advisor can be helpful because they can assess your current financial situation and your risk tolerance to develop a good investment strategy for you.

9. Investing reinforces smart spending habits

When most people have money, they want to spend it. This tempts all of us to make purchases that we may want but don't necessarily need. By putting a certain amount of money each year into a retirement account or portfolio, people are removing some of these temptations and reinforcing smart spending habits. As I mentioned earlier, each dollar invested can go a long way due to the power of compounding, so each dollar we don't invest subtracts from your future wealth.

10. You're going to need more money as you get older

It would be wonderful if everyone had financial freedom all the time, but that just isn't realistic. However, most people need more money as they get older because they have more responsibilities, whether it's starting a family, buying a house, or dealing with higher medical bills. If you invest younger when you typically have less responsibility, you'll be happy you have an investment portfolio that you can use later on if needed or that you aren't stressing about retirement. More than a few disciplined and patient investors have achieved financial freedom much earlier than they likely ever thought possible by starting early.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy.