Book Review: Why Does the Stock Market Go Up?

Kids ask a lot of questions and as homeschool parents we usually encourage them. Some questions are hard to answer because we aren’t familiar with the subject matter. That is often the case with questions about investing.

I want you to know about the book Why Does the Stock Market Go Up? by Brian Feroldi.

This book would make an excellent companion to the financial literacy curriculum your child may take to meet state requirements. Or just as a great resource book to help you answer common questions about investing and the stock market.

In fact, the subtitle says it all “Everything you should have been taught about investing in school but weren’t.”

Listen to some of these chapter titles:

• Why should I care about the stock market?
• What is a stock?
• Why does the stock market go up and down every day?
• What is the price-to-earnings (P/E) ratio?
• What is the Federal Reserve?

Have you ever wondered about some of these? In all there are 61 chapters answering common questions like these and an additional chapter on advice he would have given his younger self.

You parents might learn some helpful things for your own finances as well!

What I like about this book:

Feroldi breaks down complex topics in a way that is very easy to understand. Many chapters use a fictional company to illustrate the concept which helps you understand it better. He uses everyday language and where he does use technical financial terms he defines them so they are understood.

Each chapter is only a few pages and could be tackled as a stand-alone topic but the chapter subjects also build on each other so that as you master one concept you see how it fits into the bigger picture in subsequent chapters.

I agree with a lot of what he says about avoiding investing mistakes and working with a financial advisor and he does a good job of laying out the pros and cons of different investment types. I also think most of the advice he would give his younger self is spot on.

Do I disagree with anything?

Probably the biggest thing I would disagree with is that he recommends that if you don’t have the time or expertise to research stocks then you should invest in index funds. This is very common advice in the financial world.

Now, I do agree that if you lack the time or expertise to research individual stocks then you shouldn’t be stock picking. But, in my opinion, broad index funds, like a total market or S&P 500 index fund, pose some big problems for Christian investors.

We are supposed to steward what God has given us for His Kingdom. Stewardship takes an active mindset, but index investing is a passive “I choose not to choose” approach. This seems like a “bury the talent in the ground” approach to me. The problems with this are:

1. First, by choosing to hold everything in the market you end up profiting from everything. I don’t know about you, but I don’t want to profit from abortion, pornography, gambling, and a host of other harmful things. I’m pretty sure God wouldn’t want us profiting from those either (with His money!).
2. Second, by being passive we miss the opportunity to intentionally invest in and profit from companies whose goods and services are creating blessing and flourishing in the world. Aren’t we supposed to use our resources to be a blessing? Good investing is one way to do that.

I think for Christian investors, trying to align your investments with your faith is a better way to go. There are quite a few faith-based mutual funds and ETFs and Christian advisors who can help you build a faith-based portfolio if building and managing one yourself isn’t your expertise.

So with that hesitation, I think Why Does the Stock Market Goes Up? is a really helpful resource for homeschool parents! It compliments much of what your child will be learning in any financial literacy curriculum and it’s easy to navigate, easy to read format ensures that you can quickly get right at the answers you need.