Things Change
Last week, a friend asked me if I thought it was too late to invest in the stock market (since it recently had a very large run up.) A few questions later and I found out that he never before invested in the market (with an exception for his 401k… which I will discuss in my next blog.)
He said he never invested because he was “afraid” of losing. I know many people like that, and can definitely state that the stock market is not for everyone. However, many people not in the market should be. Things change and that includes attitudes toward risk and the realities of risk. Here are some comments for consideration for those not investing in the stock market.
Safety of principal is important, but so is cash flow. The “safe” investments of bank certificates of deposit and shorter term Treasury bonds are yielding interest payments that are below the inflation rate and about half of the yield on investments in funds duplicating the Dow Jones Industrial Average, S&P 500 Index and some other key indexes. This is not how it has always been. Things change.
Today, the rates on safe investments won’t help many people attain their goals, but possibly investing in the stock market will. What will happen is unknown, but when a careful plan is constructed for a long period, broad based stock investments cannot be ignored. Fixed income has abandoned its role as a safe investment with their record low yields. Stock market volatility is scary, but the trend line is up with the underlying qualities strong. Stock funds represent collective investments in individual businesses; overall valuations are not excessive, earnings appear sustainable, dividend payouts are reasonable based on profits and recent history has shown the continuation of dividends regardless of stock prices. Things change.
Things change. Changes in the last twenty-five years are too numerous to mention. Life styles, family values, business, technology and science. Things change. So should investing ideas formulated twenty-five years ago.
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