How Risky Is The Stock Market?
We’ve all had it drummed in our heads by now: Investing in the stock market is high-risk, high-reward. As you get closer to retirement age, it’s time to take your money out of the market and into safer vehicles.
This all makes sense. But, is the stock market really that risky of an investment?
Yes, the market crashed during the Great Recession. But today it’s back on the upswing. In early April, the Dow Jones Industrial Average rose past 11,000 for the first time in a year. In other words, stocks have made it through the Great Recession and are in recovery mode.
If you invested in the stock market right before the Great Recession, then, you’re likely seeing your investments start to rise again. If you were patient, and if you didn’t sell your shares when times were bad, you should be in line again to make a nice profit.
Consider another popular investment: residential real estate. Financial analysts have long called this a safe investment. That’s because historically, home values in the United States have risen. But look at what happened during the recession. Home values plummeted, even in some of the strongest residential real estate markets in the country.
Housing experts, though, say that real estate investors should not panic. They just have to be patient. If investors hold onto their real estate for five years, seven years or more, they should see their investment pay off. When they sell, they should make a solid profit.
This isn’t much different, then, than what investors should do when putting their money into the stock market. Patience, again, is the key. Investors who hold out the slumps can usually find a time to sell in which they’ll make a solid profit from the investments in the stock market.
Doesn’t this, then, make investing in the stock market a relatively safe investment? Yes, it does require some financial savvy. You have to make sure that you sell at the right times. But if you have enough time before retirement, and if you’re willing to hold onto your shares through the inevitable down times in the market, you should be able to realize a solid profit by investing in stocks.
Talk with your financial advisor when you’re considering investing in the stock market. One worth the fee you’re paying will guide you to stocks with which you’ll be most comfortable. Don’t consider the stock market to necessarily be a risky investment.