Buy a smart suit, charm a few people, and make a couple of shrewd investments and you’ll become a millionaire, right? Well, if you follow a Hollywood script in the hope of becoming the next Wolf of Wall Street, then the answer is yes. However, while the idea of becoming rich from the stock market isn’t an impossible dream, the reality isn’t quite as rosy as the movies make it seem.
Of course, we accept that directors have a certain amount of artistic licence when it comes to movies about money. However, for all the inevitable ups and downs of the stock market, Hollywood sure does have a way of making it look like an easy route to lots of money.
Wolf of Wall Street is the obvious example. We do get to see Belfort’s demise, but the lead up to it shows a man capable of sweet talking anyone into an investment. It’s the same with The Big Short. Adam McKay’s movie is based on the novel, The Big Short, by Michael Lewis. It charts how a number of individuals were able to see the problems with repackaging sub-prime mortgages in collateralized debt obligations (CDOs) and made money by shorting some of these products as they anticipated the collapse of the housing bubble prior to the 2007/2008 financial crisis.
Directors add drama to the stock market
Like Wolf of Wall Street, a lot of what you see in the Big Short really happened. The mortgage market crashed and many people in the financial industry either didn’t see it coming or were in denial that it was coming. Lewis and others capitalised on this and cashed in. Again, however, there’s some dramatisation.
That’s the general theme here. Hollywood movies get certain things right, but they also overemphasise the glamour of the stock market. They also clip the timelines to make the movie watchable. In reality, investments can take time to mature. Indeed, if there’s one misconception that financial movies create, it’s the idea that making money on the stock market is relatively quick and easy. When you look at how stock exchanges actually work, you’ll see that nothing is guaranteed. And, if you do make money, it won’t always happen overnight.
Investing isn’t always glamorous
If you want to get technical, a stock market is simply a vehicle of supply and demand. Some investors are selling, and others are buying. Thus, supply and demand will ebb and flow. That means you won’t always be on the right side of the coin. It also means things can take time. Something else that Hollywood movies about the stock market also overplay is how easy it is to dupe the system.
In reality, when you understand how stock markets work, you’ll see that getting an unfair advantage is virtually impossible. Every exchange is regulated. So, in the UK, the London Stock Exchange is regulated by the financial conduct authority (FCA). The FCA not only dictates how business is conducted on the exchange, but how companies listed have to behave.
Therefore, from a regulatory perspective, all investors are protected. This makes the investment market extremely safe from a security perspective. As such, there’s no doubt you can make money from investing in the stock market in a safe and secure way. However, the reality is less glamorous and not as dangerous as Hollywood movies would have you believe.
