Should the Stock Market Be Avoided?

Since the stock market crashed, many investors have been fearful. Though the value of stocks are climbing, many investors simply don’t want to invest their money in the stock market. The reasons for this fear are plentiful, including the possibility of political or financial crisis.

Some events that have occurred recently, causing some to avoid investing in the stock market, are political uncertainty (2012), the US credit rating downgrade (2011) and the financial crisis in Europe (2010). Each of these events have made investors leery of the stock market, and convinced them that stocks may be a poor investment. It is important to keep in mind, however, that even throughout these troubles, the stock market didn’t fall, and sometimes even gained value.

This is not to say that stocks aren’t risky. Many people who were heavily invested in the stock market did suffer large losses during the financial crisis of 2008. Some people simply don’t have any more faith in the stock market, and are searching for other types of investments. The continued volatility that the stock market has experienced recently also makes investors cautious, even though the markets seem to be recovering.

When looking for stock market indicators, the S&P 500 and the DOW Jones don’t always paint an accurate picture. Those who study the stock market advise that companies’ dividends and earnings make a better indicator than these indexes, so it is important not to rely on the indexes when deciding if you want to invest in the stock market.

Because of this, we can’t say if the stock market will be positive or negative. The fact is that the stock market might be a wiser investment, and one that is just as safe, as gold or bonds. Though stocks may crash, causing large losses, they may also grow steadily over long periods of time. Sometimes, they give more positive returns than gold or bonds, and sometimes the returns are more negative. Though this information might not seem important, it is. Once you understand that you can’t depend on anything for purely positive results, you will understand why it is necessary to maintain a diverse portfolio.

Spread Out Your Investment

First of all, you must invest and save for retirement. Though it may feel good to spend your money right now, it will hurt you when the time comes. Also, remember that though you may not witness amazing investment returns immediately, you should invest anyway. You must be patient since it may take years, or possibly decades for savings to accumulate to the point that you need in retirement.

To make sure that you have the money you need for retirement, you must stay away from gold, bonds or stocks, however, you must invest your wealth in gold, bonds and stocks. This means that you don’t want to put all of your money in only one area, you should diversify and put money into all of them. The more diverse your portfolio is, the more secure your investments are, and the higher the likelihood that you will be wealthy upon retirement.

For this reason, you shouldn’t avoid the stock market, you just shouldn’t invest all of your savings into stocks. Invest in a wide variety of bonds, stocks, and precious metals. This diversity will offer protection if one of these investments bottoms out.

Consider the Long Term

With any investment, be it stocks, bonds or gold, you must think about the long term. How much your investment grows in six months or a year isn’t important. You should focus on ten, twenty or thirty years into the future. Over this period of time you should experience excellent returns on your investments since you will have waited out fluctuating market factors.

You must work with a broker who understands the stock market so that they can direct you to the stocks that will be most rewarding for you. It is even possible to choose stocks with slower growth for safety, and pair them with riskier stocks to increase your short term gains. Add collectable coins or bullion and you have another potential investment with a focus on long term growth. These factors will help you even out short term, or even long term, decreases in the market.

You should also remember that even though stocks are risky, you must not completely avoid investing in them. All investments have risks, though those that come with the stock market are often very high.