Should You Avoid The Stock Market?
The crash of the stock market has scared many investors away from the stock market. Even as stocks continue to climb higher and higher the majority of investors say they are not inclined to more money into the stock market. There are always reasons why the stock market seems like an unsafe investment, such as a financial or political crisis.
Recent events surrounding the push to stay away from the stock market include the European financial crisis of 2010, the downgrade of the credit rating of the U.S. in 2011 and the politics in 2012. All of these events drove investors away from the stock market and caused them to think that stocks were a bad investment. However, at worst during this time the stock market remained flat and in some cases even rose in value.
This does not mean that stocks are not without risk. The 2008 financial crisis did cause many investors to lose everything or take huge financial hits. For some investors they have completely lost faith in the stock market and have looked into other methods of investing. The volatility in the stock market over the last few years has continued to turn investors away even as stock markets began to stabilize and come back.
When it comes to indicators of the stock market looking at the levels of DOW Jones and S&P is not always the best indicator. Experts say that better judgments can be made by looking at the earnings and dividends of companies. The index is rarely a clear indicator of whether or not the stock market is a good investment.
What all of this means is that the stock market cannot be predicted to be good or bad. In fact, the stock market can be just as safe or an even better investment than bonds or gold. Stocks can crash and cause huge losses, but they can also offer steady growth over the long run. They can offer better returns than bonds or gold in some cases and worse returns in others. This may sound like worthless information but it really isn’t. Knowing that nothing can be depended on to always give positive returns is useful information because it lets you know the importance of diversifying your portfolio.
Spread The Wealth
The important thing first and foremost is that you need to save and invest in your future. While it may offer short term gratification to spend money now, it does not help you in the long run. It is also important to keep in mind that even when you do not see dramatic returns on your investment right away, you should not turn away from investing. Patience is necessary because it can take years or even decades for your investments to grow to the size you need them to be for your retirement.
To ensure that you have money for your future you need to avoid stocks, bonds and gold, but you also need to invest in stocks, bonds and gold. You want to stay away from investing in any one thing but you do want to invest in everything. The more places that you have money the safer and more likely it will be that you will have money for the future.
Therefore the key is not to stay away from the stock market but you should not put all your savings and investments into stocks. It is a good idea to put your money into a variety into different types of stocks, bonds and even precious metals. This will protect you in case one market or investment experiences drops or volatility.
Think Long Term
When it comes to any of your investments whether it is gold, stocks or bonds, the idea should be to look far into the future. It does not matter what your returns are in six months or even a year. The goal should be to look down the road ten to twenty or even thirty years. This is when you should not only start seeing good returns on all of your investments but you will have outlasted any short term fluctuations in the market.
It is important to work with a broker that knows the market and knows what stocks have the best potential to offer long term rewards. You can even pick stocks that offer short term gains at higher risk and pair them with slower growing stocks that are much safer. You can also pick bullion or collectible coins that can vary in value over time so a long term goal should always be the focus. This can help you overcome and survive short term dips in the market or even dips that last for several years.
What you should keep in mind is that even with the obvious downside to investing in stocks it is not something that should be entirely avoided. It has the same risks as other investments but over the short term the risks associated with stocks can be much more extreme.