investing in stock market essay

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Pros and Cons of Investing in Stocks

Stock investing may be risky, but it has its benefits too

• Pros and Cons of Stock Investing
• Advantages of Stock Investing
• Disadvantages of Stock Investing

Diversify To Lower Investment Risk

The bottom line, frequently asked questions (faqs).

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Investing in stocks means that you own a piece of a company that you buy a stock in. As the company grows, you can expect the stock to deliver a return on your investment. What are the pros and cons of investing in the stock market ?

Historically, the stock market has delivered generous returns to investors over time, but it also goes down, presenting investors with the possibility of both profits and loss, for risk and return.

Stock Investing Pros and Cons

Grow with economy

Stay ahead of inflation

Easy to buy

Don't need a lot of money to start investing

Income from price appreciation and dividends

Stockholders of broke companies get paid last

Takes time to research

Taxes on profitable stock sales

Emotional ups and downs

Competing with institutional and professional investors

6 Advantages of Stock Investing

Stock investment offers plenty of benefits:

• Takes advantage of a growing economy : As the economy grows, so do corporate earnings. That's because economic growth creates jobs, which creates income, which creates sales. The fatter the paycheck, the greater the boost to consumer demand, which drives more revenues into companies' cash registers. ​​It helps to understand the phases of the  business cycle —expansion, peak, contraction, and trough.
• Best way to stay ahead of inflation : Historically, over the long term stocks have yielded a generous annualized return. For example, as of January 31, 2022, the 10-year annualized return for the S&P 500 was 15.43%. That's better than the average annualized inflation rate. It does mean you must have a longer time horizon, however. That way, you can buy and hold even if the value temporarily drops.
• Easy to buy : The stock market makes it easy to buy shares of companies. You can purchase them through a broker or a financial planner, or online. Once you've set up an account, you can buy stocks in minutes. If you're a small business owner, you may even be able to invest in stocks through your business .
• Don't need a lot of money to start stock investing : Most retail brokers such as Charles Schwab, let you buy and sell stocks commission-free. Some brokers such as Fidelity also don't require account minimums. If the stock you want to buy is too expensive, you can also buy fractional shares if your broker allows for such investment.
• Make money in two ways : Most investors intend to buy low then sell high. They invest in fast-growing companies that appreciate in value. That's attractive to both day traders and buy-and-hold investors. The first group hopes to take advantage of short-term trends, while the latter expect to see the company's earnings and stock price grow over time. They both believe their stock-picking skills allow them to  outperform the market . Other investors prefer a regular stream of cash. They purchase stocks of companies that pay dividends. Those companies grow at a moderate rate.
• Liquidity : The stock market allows you to sell your stock at any time. Economists use the term "liquid" to mean that you can turn your shares into cash quickly and with low transaction costs. That's important if you suddenly need your money. Since prices are  volatile , you run the risk of being forced to take a loss.

6 Disadvantages of Stock Investing

Here are disadvantages to owning stocks:

• Risk : You could lose your entire investment.   If a company does poorly, investors will sell, sending the stock price plummeting. When you sell, you will lose your initial investment. If you can't afford to lose your initial investment, then you should buy bonds.
• Common stockholders paid last :  Preferred stockholders  and bondholders or creditors get paid first if a company goes broke. But that happens only if a company goes bankrupt. A well-diversified portfolio should keep you safe if any company goes under.
• Time : If you are buying stocks on your own, you must research each company to determine how profitable you think it will be before you buy its stock. You must learn how to read financial statements and annual reports and follow your company's developments in the news. You also have to monitor the stock market itself, as even the best company's price will fall in a  market correction , a market crash, or bear market.
• Taxes : If you sell your stock for a loss, you may be able to get a tax break. However, if you sell your stock for a profit, you'd be liable to to pay capital gains taxes .
• Emotional roller coaster : Stock prices rise and fall second by second. Individuals tend to buy high out of greed, and sell low out of fear. The best thing to do is not constantly look at the price fluctuations of stocks, and just check in on a regular basis.
• Professional competition : Institutional investors and professional traders have more time and knowledge to invest. They also have sophisticated trading tools, financial models, and computer systems at their disposal.

The Balance / Alison Czinkota

While investing in stocks is riskier compared to bonds, there are ways to reduce your investment risk, such as by diversifying. Diversification means investing in different types of assets, across different sectors so that you spread out your risk. If one type of stock or asset goes down in value but other types of investments go up or stay the same, your entire portfolio is not impacted in a big way.

Here are some ways you can diversify your stock investments:

• By investment type : A  well-diversified  portfolio will provide most of the benefits and fewer disadvantages than stock ownership alone. That means a mix of stocks, bonds, and commodities. Over time, it's the best way to gain the highest return at the lowest risk.
• By company size : There are large-cap, mid-cap, and small-cap companies. The term "cap" stands for " capitalization ." It is the total stock price times the number of shares. It's good to own different-sized companies because they perform differently in each phase of the business cycle. For example, large cap companies are considered more stable and less susceptible to share price volatility. On the other hand, small cap companies might be riskier and prone to share price volatility but offer greater growth potential.
• By location : Own companies located in the United States, Europe, Japan, and emerging markets. Diversification allows you to take advantage of growth without being vulnerable to any single geography.
• Through mutual funds and ETFs : Owning mutual funds or exchange-traded funds (ETFs) allows you to own hundreds of stocks selected by the fund manager. One easy way to diversify is through the use of index funds or index ETFs.

There are clear benefits and drawbacks of investing in stocks. Historically, stocks have generated generous returns over the long-term but investing in stocks also comes with significant risk. Risks of stock investing can be spread across different stocks, sectors and geographies, in a process called diversification.

How much of each type of investment should you have? Financial planners suggest you establish your  asset allocation  based on your financial goals and where the economy is in the business cycle .

Key Takeaways

• Investing in the stock market can offer several benefits, including the potential to earn dividends or an average annualized return of 10%.
• The stock market can be volatile, so returns are never guaranteed.
• You can decrease your investment risk by diversifying your portfolio based on your financial goals.

What does it mean to invest in stocks?

Investing in stocks means you're buying equity in a company. In other words, you're part owner, even if you only own a tiny fraction of the company. You can invest in stocks by purchasing whole or fractional shares in companies. You can also buy mutual funds or exchange-traded funds that invest in stocks.

How do you start investing in stocks?

The first thing you need to invest in stocks is access to the market through a brokerage account. The process of opening a brokerage account is similar to that of opening a checking account. The next step is to identify which stocks you want to buy and how much you want to invest in that particular stock. Do your research and evaluate your risk appetite before you make that decision. Lastly, place an order to buy the stock.

How do you make money investing in penny stocks?

Penny stocks are typically stocks that trade at a share price of $5 or below. They are small companies that hope to grow into big ones, and there's potential to profit from that growth, but there's also the risk that the company will never grow or may even go out of business. Penny stocks are very unlikely to offer dividends, which means you will make money through capital appreciation.

How much can you make investing in stocks?

No one can predict which way a stock will go, so there's a chance that you make money and a chance that you lose all of it. In general, the more money you invest, the higher your potential gains or losses. The S&P 500 gained about 15.43% per year over the 10 years ending January 31, 2022. So someone who had invested all their money in an S&P index fund during that time would have made about 15% profit from their investments per year.

S&P Dow Jones Indices. " S&P 500 ," (Download Factsheet).

Chalres Schwab. " $0 commissions on online trades ."

Fidelity. " Open An Account ."

U.S. Securities and Exchange Commission. " Fractional Share Investing – Buying a Slice Instead of the Whole Share ."

Federal Reserve Bank of St. Louis. " Net Corporate Dividend Payments ."

U.S. Securities and Exchange Commission. " Answers to Test Your Money Smarts ." Page 1. AccessedFeb. 15, 2022.

Investor.gov. " Stocks ."

Internal Revenue Service. " Topic No. 409 Capital Gains and Losses ."

Investor.gov. " What is diversification? "

FINRA. " Market Cap, Explained ."

Fidelity. " Trading Penny Stocks ."

Essay on Stock Market

Students are often asked to write an essay on Stock Market in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Stock Market

What is the stock market.

The stock market is a place where stocks are bought and sold. A stock is a share of ownership in a company. When you buy a stock, you are becoming a part-owner of that company.

How Does the Stock Market Work?

The stock market is a complex system, but the basic idea is that buyers and sellers come together to agree on a price for a stock. The price of a stock is determined by supply and demand. When there are more buyers than sellers, the price of the stock goes up. When there are more sellers than buyers, the price of the stock goes down.

Why Do People Invest in Stocks?

People invest in stocks for a variety of reasons. Some people invest to make money. They buy stocks that they believe will go up in value, and then they sell them for a profit. Other people invest to save for retirement. They buy stocks that they believe will provide them with a steady income in the future.

Risks of Investing in Stocks

Investing in stocks is not without risk. The value of stocks can go down as well as up. This means that you could lose money if you invest in stocks. However, over the long term, the stock market has historically provided a good return on investment.

250 Words Essay on Stock Market

What is a stock market.

A stock market is a place where people buy and sell shares of companies. When you buy a share of a company, you are essentially becoming a part-owner of that company. The value of your share will go up if the company does well, and it will go down if the company does poorly.

How Does a Stock Market Work?

Stock markets are typically regulated by government agencies. These agencies set rules and regulations to ensure that the markets are fair and orderly. When you buy or sell a share of stock, you do so through a stockbroker. Stockbrokers are licensed professionals who help investors buy and sell stocks.

Why Invest in the Stock Market?

There are many reasons why people invest in the stock market. Some people invest to make money, while others invest to save for retirement or to build wealth for their families. The stock market can be a volatile place, but over the long term, it has historically been a good investment.

Risks of Investing in the Stock Market

There are also risks associated with investing in the stock market. The value of your investments can go down as well as up, and you could lose money. It is important to understand the risks involved before you invest in the stock market.

The stock market can be a complex and confusing place, but it can also be a rewarding one. If you are considering investing in the stock market, it is important to do your research and understand the risks involved. You should also consider seeking the help of a financial advisor.

500 Words Essay on Stock Market

A stock market is a place where people can buy and sell stocks. Stocks are pieces of ownership in a company. When you buy a stock, you are essentially becoming a part-owner of that company. Companies issue stocks to raise money to grow their business.

The stock market is a regulated marketplace where buyers and sellers of stocks can come together to trade. The price of a stock is determined by supply and demand. When there are more people who want to buy a stock than there are people who want to sell it, the price goes up. When there are more people who want to sell a stock than there are people who want to buy it, the price goes down.

Types of Stock Markets

There are two main types of stock markets: primary and secondary. In a primary market, companies sell stocks to investors for the first time. In a secondary market, investors buy and sell stocks that have already been issued.

Benefits of Stock Market

The stock market can be a great way to grow your wealth over time. When companies do well, their stock prices go up, and you can sell your stocks for a profit. The stock market can also be a good way to save for retirement.

Risks of Stock Market

The stock market is not without its risks. Stock prices can go down as well as up, and you could lose money if you sell your stocks at a lower price than you paid for them. It is important to do your research before you invest in any stock.

How to Invest in Stock Market

If you are interested in investing in the stock market, there are a few things you need to do first. You need to open a brokerage account, which is an account that allows you to buy and sell stocks. You also need to learn about the different types of stocks and how to analyze them. Once you have done your research, you can start investing in stocks.

The stock market can be a great way to grow your wealth over time, but it is important to understand the risks involved before you invest. If you do your research and invest wisely, you can increase your chances of success.

That’s it! I hope the essay helped you.

If you’re looking for more, here are essays on other interesting topics:

• Essay on Stereotypes And Prejudice
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Investing 101: A Guide to Investing Basics

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Investing 101: A summary of the basics

Investing is all about making your savings multiply. Before we dive into all the details of how to do that, here are a few investing basics for beginners:

How much money you need to start investing: Not a lot. In fact, it’s mathematically proven that it’s better to start small than to wait until you have more to deploy — even if you try to play catch-up down the road. That little eye-opener is thanks to a magic formula called compound interest. (We’ll get into how that works in a minute and — yep — we’ve got a calculator for it.)

What to invest in: Stocks are one option. You can also consider investment vehicles that provide exposure to the stock market. The stock market is the place that will deliver the best long-term return on your money.

How to buy stocks: The easiest way to start investing in stocks , and the most common, is to buy a mutual fund — a type of investment that pools money from many investors and invests it in a group of different stocks; call it the “eggs in many baskets” approach.

The secret to making money in stocks: Stay invested. Time (to let your investments ride out the market’s inevitable short-term rough patches) and temperament (the ability to keep cool while others are freaking out) are the keys to investment success. So says a guy you might have heard of named Warren Buffett.

Now that you have the lay of the land, let’s dig in.

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Saving vs. investing

There’s saving (amassing money) and then there’s investing (making it multiply). Two big differences between them: time and the type of account you use as a holding pen for your money.

Saving is what you do with the money you’re going to use to pay for short-term goals — ones in the next five years or so. That money belongs in an account where it’s liquid — that is, easily accessible — and safe, such as a high-yield savings account or even a CD if you’re confident you won’t need the funds until after a certain date.

Investing is what you do with money earmarked for long-term goals such as retirement. With a long time horizon, you can make growth, rather than liquidity, the priority.

What’s wrong with simply playing it safe with all your retirement money and keeping it in cash? Inflation! Dun dun duuunnnn.

Over time, inflation erodes the purchasing power of cash . That effect is especially strong when inflation is high, but it's also true during typical years when inflation is running 2% or 3%. At just 3% inflation, when you go to spend a $100 bill you stashed in a coffee can last year, that money will only get you $97 worth of groceries compared with what it would have gotten you last year. In other words, the cash you’ve been sitting on doesn’t buy as much as it used to, because everything has gotten 3% more expensive. That’s how it’s possible to save money and lose money — that is, spending power — at the same time.

Now imagine the effect of decades of inflation on wads of money. Actually, you don’t have to imagine — this inflation calculator will show you.

You want your long-term investments to outpace inflation, right? Well…

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Should you invest in the stock market?

One look at the historic rate of return of the major asset classes shows that the stock market is going to give you the biggest bang for your bucks. Historically, the stock market ' s average annual return is 10% before inflation ; other asset classes rarely come close to that.

But many people say they think it’s too risky or they don’t know how to invest money . While this is a valid concern, and investing does carry the risk of loss, having a diverse portfolio can better equip you to weather market ups and downs, and ultimately achieve your goals.

Your dollars could become more valuable

If you start investing now, you can let your savings dollars hitch a ride in a vehicle you can hold on to for years and have it possibly become more valuable than when you started.

It’s like reverse inflation: The hamburger you could buy for $1 when you were a kid would cost you $5 decades later. But you can’t store the $1 burger away for years and sell when it’s worth $5. Instead, you can buy shares in a bunch of companies involved in making that burger — the bun and beef manufacturers, packaging producers, retailers and restaurants (we’ll show you how in a moment) — and reap the rewards of their growth right alongside them.

» Check your potential returns: Investment calculator

The benefits of compound interest

What is compound interest ? It's like a runaway snowball of money growing larger and larger as it rolls along. All you need to get it going is starter money.

As interest starts to accumulate on your initial investment, it is added to your ball of cash. You continue to earn interest, your balance expands in value and picks up speed — and on and on it goes.

The sooner you get the snowball rolling, the bigger it has the potential to get. Now, let’s go over how to make your pennies multiply.

4 ways to start investing

If you own a mutual fund (in your 401(k), for example) then — congratulations! — you already own stocks. A lot of people don’t realize that.

But that’s just one of the ways investors can get in on the greatest wealth-building machine on the planet. The four most common entry points into the stock market are:

1. Individual stocks

We won’t sugarcoat it: Buying individual stocks requires a fair amount of research, ongoing diligence and a stomach for risk. Those aren’t things that most retirement savers want to deal with. In fact, many 401(k) plans don’t even allow participants to buy individual stocks within the plan. If buying stocks sounds exciting to you, you might consider devoting no more than 10% of your retirement portfolio’s overall value to them to limit risk.

2. Mutual funds

A mutual fund is a basket that contains a bunch of different investments — often mostly stocks — that all have something in common, be it companies that together make up a market index (see the box for more about the joys of index funds), a particular asset class (bonds, international stocks) or a specific sector (companies in the energy industry, technology stocks). There are even mutual funds that invest solely in companies that adhere to certain ethical or environmental principles (aka socially responsible funds ).

What’s nice about mutual funds is that in a single transaction, investors are able to purchase a neatly packaged collection of investments. It’s instant, easy diversification (exposure to lots of different companies) that lets you avoid buying stocks one by one.

3. Index funds

Of all the types of mutual funds investors can purchase, we’re partial to a particular type: index funds .

Why? Because index funds generally charge lower fees, called expense ratios , than traditional mutual funds. And that lower cost is a big-time boost to your overall returns.

An index fund’s sole investment objective is to mirror the performance of a market index, such as the S&P 500 or the Nasdaq Composite.

These funds are made up entirely of the stocks contained in a particular index. (The S&P 500 index contains shares of aboout 500 of the largest publicly traded U.S. companies, while the Nasdaq tracks thousands of stocks traded on a different exchange.) So the returns of these index funds mirror that of the market they track.

The investment objective of actively managed mutual funds, on the other hand, is to “beat the market’s returns” (translation: to outperform a benchmark index). To do that they employ managers to pick and choose the investments in a fund.

The cost of that management, along with expenses for trades, administration, marketing materials, etc., comes out of your investment returns. Largely because of that, the majority of actively managed mutual funds actually underperform their benchmark index.

Index funds are essentially run by robots. (Okay, not literal robots, but computer algorithms programmed to automatically track the market’s comings and goings.) Computer robots don’t demand Wall Street-sized year-end bonuses or need corner offices, which makes them a lot cheaper.

Those savings are passed along to you. In fact, investors pay nearly nine times more in fees for actively managed mutual funds. Choose an index fund, and more of your money stays in your portfolio to grow over time.

4. Exchange-traded funds

Like index funds, ETFs contain a bundle of investments that can range from stocks to bonds to currencies and cash. The beauty of an ETF is that it trades like a stock, which means investors can purchase them for a share price that is often less than the $500-plus minimum investment many mutual funds require.

So which of these should you use to build your retirement portfolio? The answer will be clearer after you learn how to choose investments .

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Why Should I Consider Investing?

The Importance of Investing at Any Age

Investing is an effective way to have your money work for you and build wealth. Holding cash and bank savings accounts are considered safe strategies, but investing your money allows it to grow in value over time with the benefit of compounding and long-term growth.

Whether you invest in stocks, bonds , mutual funds , options ,  futures , precious metals , real estate, or small businesses, investing is important to generate future income, increase value and equity, and build wealth.

Key Takeaways

• Investing is an effective way to have your money work for you and build wealth.
• Investments may include a range of choices, including stocks, bonds, mutual funds, exchange-traded funds, and real estate.
• An individual's investment goals depend on their income, age, and risk tolerance.

Why Investing Is Important at Any Age

An individual's goals depend on a host of factors that may include age, income, and risk profiles. Age can be further subdivided into the following three categories:

• Young and starting in a career
• Middle-aged and family-building
• Retirement age and self-directed

These segments often miss their marks at the appropriate age, with middle-aged folks considering investments for the first time or the elderly forced to budget, employing the discipline they lacked as young adults.

Income provides the natural starting point for investment planning because you can’t invest what you don’t have. A young adult's first job issues a wake-up call, forcing decisions about IRA contributions, savings, or money market accounts, and the sacrifices needed to balance growing affluence with the desire for gratification. Don't worry too much about setbacks during this period, like getting overwhelmed by student loans and car payments, or forgetting that your parents no longer pay the monthly credit card bill.

Outlook defines the playing field on which we operate during our lifetimes and the choices that impact wealth management. Family planning sits at the top of this list for many individuals, with couples figuring out how many kids they want, where they want to live, and how much money is needed to accomplish those goals. Career expectations often complicate these calculations, with the highly-educated enjoying increased earning power while those stuck in low-level jobs are forced to cut back to make ends meet.

It’s never too late to become an investor. You may be well into middle age before realizing that life is moving quickly, requiring a plan to deal with old age and retirement. Fear can take control if waiting too long to set investment goals, but that should go away once you set the plan into motion. Remember that all investments start with the first dollar, whatever your age, income, or outlook. That said, those investing for decades have the advantage, with growing wealth allowing them to enjoy the lifestyle that others cannot afford.

Whether your goal is to send your kids to college, build wealth to hand down , or to retire on a yacht in the Mediterranean, investing is essential in reaching your financial objectives in life.

U.S. Securities and Exchange Commission. " Saving and Investing: A Roadmap To Your Financial Security Through Saving and Investing ." Page 12, 16, 17.

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Investment in the Stock Market

An investment is an asset people buy with an expectation of a future financial return. There are different classes of investment that vary depending on the capital employed, the risk involved, and expected returns. Specifically people can choose to invest in bonds, stocks, or cash equivalents. Bonds are the least risky but also have the least returns. Stocks and cash equivalents or more risky and come with better returns. In general, each option has its advantages and disadvantages.

A stock is the top form of investment that an individual can consider. An investor chooses the company’s stock that they prefer from the stock market. Amadeo (2020) states that stocks have for a long time generated impressive returns to investors. Warren Buffet is a renowned billionaire who has generated much of his wealth through the stock market. Modern technology has simplified trading in the stock market so that a person can trade from the comfort of their home using a mobile phone or computer.

On the other hand, the stock market is precarious; investors can lose their entire investment within a very short time. Stock prices vary every day depending on either internal factors that affect activities within an organization or external factors that involve forces out of the control of the organization; such as politics, legal and economic changes, among others. Besides, investing in stocks is very emotional because of the fluctuating stock prices (Amadeo, 2020). Therefore, an investor has to be careful not to make rushed decisions in the stock market

Investing in the stock market requires an in-depth analysis of the company’s stock. This enables an investor to fully understand if there is a possibility of making sound financial returns. The investigation is conducted through a financial analysis; it involves the calculation of various ratios. The ratios are calculated to show the profitability, liquidity, solvency, or capital composition of the company.

Amadeo, K. (2020). Pros and cons of investing in stocks, plus ways to lower risk. The Balance.

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About InvestWrite

The SIFMA Foundation’s InvestWrite® program is an innovative national writing competition offered to teachers and students participating in The Stock Market Game™ .

Your students have entered the world of business and finance by participating in The Stock Market Game™ . The perfect companion, our teacher-designed writing component and competition, reinforces their newfound knowledge and hones critical thinking skills.

Utilizing feedback from teachers nationwide, InvestWrite® builds a bridge between classroom learning and the real world. InvestWrite complements The Stock Market Game™ learning experience and easily integrates across subjects throughout your curriculum.

Whether you and your students win laptops, gift cards, pizza parties -- or not, you'll all benefit by enhancing your Stock Market Game experience through writing.

Essays written by students in the classroom

Teachers offered classroom experiences

Essays submitted by teachers in the National Competition

Volunteer judges read & scored essays

Offered at NO COST For Qualifying Stock Market Game Participants*

What's required to participate*.

• Teachers currently registered and participating in The Stock Market Game with actively trading student teams are eligible.
• Students currently registered in The Stock Market Game with a valid team login ID and password are eligible.
• Students participate by writing essays in their grade division: Elementary (4-5), Middle School (6-8), High School (9-12).
• Teachers/advisors can choose to assign the InvestWrite writing assignment as an in-class or homework assignment.
• Both teachers and students will have a chance to win gift certificates, laptop computers, and other great awards.

Each participating student submission has a chance to be reviewed by the competition's first round judge...you, the teacher/advisor.

Then, as the first round judge, you select the top responses from each class or group of participants (based on the guidelines and directions).

Then you submit them electronically on this website for the next round of evaluation at the national level.

Testimonials

May Quan - Elementary School Teacher

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InvestWrite allows students to reflect on the learning process by writing about their experience playing The Stock Market Game. Students who participate in The Stock Market Game and the InvestWrite competition are able to explain their investment strategies and explain their recommendations based on what they have learned about saving and investing. This competition allowed students to understand opportunity cost.

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Can Your Investment Portfolio Reflect Your Values?

Forget about endowments and their holdings and divestment for a minute. What do you stand for, and how can you make your portfolio reflect that?

By Ron Lieber

The protests roiling college campuses are filled with all sorts of demands, but many of them have one thing in common: money.

Many pro-Palestinian protesters want their school’s endowments to pull money from investments in companies that have financial ties to Israel . Most institutions have declined to do so.

This form of financial protest is not new. We all want to live our values and have our colleges, employers and communities do so, too. We saw similar protests in the 1970s and ’80s with South Africa and in the continuing debate over climate change. Students, especially, can learn a lot about investing, governance and complexity through trying to influence their schools.

But many individual investors also have the ability to press the eject button on stocks that they disfavor, all on their own. This week — after years of being disgusted by the way that a small number of companies have treated their American customers, employees and the public trust writ large — I finally did it myself. This is personal, so I will not name the companies here. But, to be clear, it had nothing to do with Israel and Gaza, and everything to do with how investing in bad corporate actors made me feel.

I’m not saying you should do this, too. But if you want to, it is becoming easier with each passing year.

At first glance, the process may seem simple. If you don’t want certain stocks in your portfolio, you don’t have to buy them or you can sell them if you already have them — and send an impassioned note to the company’s executive team for good measure.

But many people invest in index funds — big baskets of the stocks that make up, say, the entire U.S. stock market. Until recently, it hasn’t been possible in most instances to call up a fund company and demand that it remove or double down on certain stocks just for you.

That, however, is changing. You can do your own subtraction inside an index-like collection of investments through a strategy called direct indexing . It’s available mostly in brokerage accounts and not retirement ones, though that may change as the strategy becomes more popular.

A financial services company that does direct indexing buys stocks in a particular index on your behalf, and you own the shares directly, not through a mutual fund or an exchange-traded fund. One big advantage of direct indexing is that you can save money on capital gains taxes by buying and selling stocks at the right time to offset winners with losers. Another advantage is that the companies will let you keep certain stocks out of your portfolio, but you can still own all the other stocks that are part of the index you want to mimic.

Direct indexing has been around for years, but the minimum amount of money that a company requires you to invest keeps decreasing. Fidelity will let some people do it with a minimum investment of $5,000. A start-up called Frec requires $20,000. At Wealthfront , the service is for accounts over $100,000.

There are fees, too, and there may be limits on the number of companies you can exclude.

The financial services companies that offer direct indexing are bring-your-own-agenda entities. That lack of institutional advocacy — and the fact that most people can’t yet do direct indexing through a retirement portfolio, where many people who invest keep the bulk of their stocks — will limit the social impact of this form of stock deselection for now.

Still, we all have to live with ourselves. If feeling better about your investments is just a question of removing a few bad actors, then direct indexing may be worthwhile for that reason alone.

An additional feature of some offerings that is both curious and complicating is the ability to screen out industries, or parts of them. This isn’t just your standard get-me-out-of-oil stocks feature.

Aperio , a direct indexing offering that the investing colossus BlackRock bought for over $1 billion, offers a screen for people who want to avoid investing in predatory lenders. How does it define those lenders? It hands the question off to a company called MSCI , which is an assembler of data and indexes of various sorts.

MSCI looks out for any suspect (but typically legal) lending practices, but none of the companies on its no-go list are major banks, card companies, credit bureaus, student loan issuers or mortgage providers. The six on its current list include companies in the rent-to-own and pawnshop categories.

“Applying investment exclusions may sound simple in theory, but in practice these require nuance,” Melanie Blanco, an MSCI spokeswoman, said in an email. “Values-based exclusions require an understanding of the various ways a company can be involved in a business activity.” Indeed, so many companies make money in so many places from actions both direct and indirect that it can be hard to know where to draw a red line.

For what it’s worth, none of the direct indexers I spoke to this week were hearing from customers clamoring for a Gaza screen that would subtract companies like the ones that some protesters hoped to excise from university endowments. That does not, however, mean that people aren’t moving individual companies out of their baskets of stocks, even if the reasons aren’t always clear.

Mo Al Adham , the founder and chief executive of Frec, said he couldn’t be sure whether the customers who had moved Boeing out of their holdings in recent months were doing so because of questions about the company’s planes and their safety or questions about its work in Israel . They could also be avoiding Boeing because they worked there; getting your salary from the company is financial exposure aplenty without also choosing to own its stock. Or it could be something else entirely.

But just because direct indexers haven’t created a screen around the war in Gaza — as opposed to last year’s biggest controversy or next year’s — doesn’t mean you can’t. My screen happened to be about the mistreatment of customers. Yours may be about something even more idiosyncratic.

It takes all kinds of investors to make a market. The fact that it’s becoming easier to make your mark is good news for those who care to try.

Ron Lieber has been the Your Money columnist since 2008 and has written five books, most recently “The Price You Pay for College.” More about Ron Lieber

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Want to Build Wealth in the Stock Market While Barely Lifting a Finger? Start With This Surefire Index Fund

B uilding wealth in the stock market may seem like a daunting task. There are countless stocks and funds to choose from, and investing in the wrong places could be costly.

However, while there will always be some degree of risk when investing in the stock market, some investments are much safer than others. There's one particular index fund that is about as close as you can get to guaranteed positive long-term returns, and it requires next to no effort on your part. Here's what you need to know.

A safe yet powerful investment

If you're looking to generate long-term wealth with minimal effort, an S&P 500 index fund could be a fantastic addition to your portfolio. This type of investment tracks the S&P 500 index , which means it includes the same stocks as the index and aims to mirror its performance over time.

The S&P 500 itself includes stocks from 500 of the largest and strongest companies in the U.S., ranging from tech giants like Apple and Amazon to century-old brands such as Coca-Cola and Procter & Gamble . When you invest in just one S&P 500 index fund, you'll instantly own a stake in all 500 of these companies.

Because this type of fund only includes large stocks from solid companies, it's more likely to recover from downturns. In fact, when analysts at Crestmont Research examined the S&P 500's long-term performance, they found that every single 20-year period in the index's history ended in positive total returns.

In other words, if you'd invested in an S&P 500 index fund at any point in history and simply held it for 20 years, you'd have made money -- no matter how volatile the market was in that time. If you're nervous about market turbulence, an S&P 500 index fund is one of the safest and most reliable funds out there.

Perhaps the biggest advantage of investing in an index fund is that it requires very little effort on your part. All the stocks are chosen for you, and you never need to worry about deciding when to buy or sell. Simply invest whatever you can afford each month, then sit back and wait for your money to grow.

How much can you earn with an S&P 500 index fund?

Index funds are long-term investments, so the more time you give your money to grow, the more you can potentially earn. Even safer funds like the S&P 500 index fund can experience short-term volatility, but over decades, it's incredibly likely that you'll see positive total returns.

Historically, the market itself has earned an average rate of return of around 10% per year -- meaning the annual highs and lows have averaged out to around 10% per year over decades. To play it safe, let's assume your investment earns slightly lower returns of around 8% per year, on average.

If you were to invest, say, $200 per month while earning 8% average annual returns, here's approximately how much you could accumulate over time:

Data source: Author's calculations via investor.gov.

Again, the more time you have to invest, the easier it will be to build a robust portfolio worth hundreds of thousands of dollars. Regardless of how much you can afford to invest per month, getting started now can help maximize your long-term earnings.

S&P 500 index funds are a fantastic choice for those looking for a safer, more reliable, and nearly effortless investment. By investing consistently and staying invested for the long haul, you could build a portfolio worth hundreds of thousands of dollars or more.

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