Investing – a Conundrum
When it comes to investing in the stock market, the most sound peice of advice there has ever been is this gem:
“Only invest in the stock market that which you can afford to lose.”
It’s been said a hundred different ways – but the message is very clear, and always the same. If you *need* that money and can’t afford to lose it, stay away from stocks, period. Excellent advice, and something I offer to any new investors.
The Biggest Conundrum of all
Where do most of us keep our retirement savings? 401(k)’s, Roth IRA’s, SEP-IRA’s, etc. And the funds in those vehicles are invested in what, exactly? The stock market. That’s right. Your retirement money, your nest egg, whatever you want to call it – all in the stock market. The money you’re counting on to keep you alive and kicking when you’re too old to work – invested in a very risky area.
What ever happened to that sound advice from above? Out the window – gone. For some reason, when it comes to investing for retirement, people assume the old rules don’t apply. Why is that, you ask? I simply don’t know.
Don’t ignore good advice
Retirement investing should not be solely in the form of stocks and mutual funds. That is a fool’s errand, and ignores perfectly good advice. Remember, diversify, diversify, diversify. Stocks are not bad, and should not be avoided. But you cannot throw all your money at stocks and assume you’ll have a financially secure retirement. Investing for retirement requires a different view than short-term investing, but it doesn’t mean you can ignore all the rules and get away with it.
March 16th, 2009 at 12:09 am
“only invest what you can afford to lose” only makes any sense at all if you already have enough assets that you could get by just stuffing your money into your mattress. most people don’t perceive their situation as being like that- though whether that is based on unreasonable expectations for their future “lifestyle” is a question worth exploring.
if “can’t afford to lose it” is really taken seriously, only treasuries will do. if you have the income to finance a prompt and comfortable retirement on breakeven “investments”, then you make enough cheddar that you _could_ afford to lose it. THERE is your conundrum.
March 16th, 2009 at 7:57 pm
I’m not suggesting that we all sleep on mattresses made of federal reserve notes – though I’d like to try it just once. My point was that all of us have heard the advice – don’t put money in the stock market if you can’t afford to lose it. Then those same people touting that advice will put every dollar of their retirement savings into the stock market. Doesn’t make much sense.
March 19th, 2009 at 3:28 am
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