Is the Stock Market for Me?

August 6, 2009

Many of my longtime clients have dabbled in the stock market at one time or another.  Some of them have seen their 10 and 15 year earnings hit the negative number in the last year.  You once could invest in the stock market and be assured if you hung in there for 10 years or more you would make out with a 8 to 12 percent growth.  Not so anymore.

What use to be the old standard investment philosophy that worked for 50 plus years doesn’t work any more.  A person must think very carefully about investing in today’s volatile market.  Maybe a more balanced approach would be prudent.

The old theory was to invest 100 minus your age as a percentage into the stock market.  For example, if you are 40 years old you would invest 60% of your money into stocks and 40% into bonds.  Unfortunately, many people were invested at a much higher percentage over the last few years and the plummet of the stock market due to the mortgage crisis has hurt many investors especially those who were close to retirement.

Personally I am far more conservative in my approach.  Instead of shooting for the stars and trying to obtain a 12 to 15% return on my money I focus more on a 6 to 8% range.  This works for me and might not for you.  I have a modest lifestyle so the total amount of retirement funds I will need is lower.

We all would like to retire in luxury but with the crash of the market most people have taken a much simpler outlook on life.  Having “things” is not what matters in the end.  It’s having peace of mind and enjoying our time with our loved ones.

With the nations skyrocketing debt there is great uncertainty as to how the market will react.  New taxes will probably be imposed to help reduce the debt and the stock market does not like taxes.  The risk of the stock market is much greater today than it was 10 years ago.

Is the stock market right for you?  To some extent you will need to utilize the stock market but your tolerance of the risk must be measured very carefully.  There are a number of more conservative options but remember, the more conservative the investment the lower the rate of return.

The only way to truly know is to sit down with a Financial Advisor and weight the pros and cons and determine how much you are willing to risk.  Moderation is key. 

What If?

Few of us are able to survive today without building personal debt. It may include lingering school loans, auto financing, a mortgage, or credit card debt.

 One of the reasons we go to work every day is to make all of those payments when they’re due. Have you ever thought about what would happen to your financial picture if you had a heart attack, cancer, or a stroke and couldn’t return to your career or the paycheck that makes those payments possible?

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