Should Retirement Plans Include Stocks Anymore?

Investing in stocks and retirement planning

Got The Time? Invest Wisely For Retirement

Stocks are for best when used for long-term investing. Saving for retirement is a long-term venture.

You will need to save for about 40 years to be able to afford retirement. That long period of investment time is why stocks are a good investment for retirement plans. The waves of market volatility over time can even out your investment returns.

Some investors right now may disagree. Unfortunately a long run of low stock returns has spooked many investors into changing their retirement strategies.

Changes such as investing less in aggressive investments or pulling money out of stock funds and adding to bond funds are good changes when stocks are exhibiting such volatility. But pulling investment money out of the market altogether during a market recovery is not a good change.

Steady As She Goes

Keep your emotions in check when you are investing. Markets move due to unpredictable situations, circumstances, conditions and surprises…all of which are out of your control.

If you are the type of person who needs to be control of everything, investing in stocks will drive you crazy. If you cannot tolerate market volatility, stocks may not be right for you. The stock market is a roller coaster. If you don’t like the bumpy ride maybe you need to change your investment strategy.

The Value Of Investing In Stocks

  • You Get More For Your Money

Long stretches of poor stock performance allows you to buy more shares. During market recoveries you are actually buying stocks on sale. That’s the perfect time to increase your retirement plan contributions. When the markets do rebound the value of your retirement account will be worth more due to the simple fact that you own more shares.

  • Investment is a long way
    courtesy of tracielehman

    Opportunity For Higher Returns

Stocks have a higher volatility than bonds or cash equivalents. That is their downside risk but that is also what makes stocks attractive. Higher risk equals a greater chance of higher returns.

  • You Have Greater Diversity

Stocks give you the ability to diversity your investment mix. Diversification provides a cushion. It helps cut your losses by offsetting those losses with gains. When one stock takes a dip another stock may soar.

  • Expenses Do Matter

Trading individual stocks can be relatively inexpensive if you trade through a discount broker. The trading fees drop even more if you trade online.

You can also keep trading expenses down if you buy stocks through a mutual fund. Buy no load funds and buy funds with low expense ratios. A good rule of thumb is to buy mutual funds with expense ratios below 1%.

It’s A Long Way To Retirement

Buying and holding stocks for the long run provides you financial opportunities that other investments do not. Stock returns have not been keeping up with inflation lately, but is that a reason to pull out? Right now other investments are not returning rates that beat inflation either.

The stock market may seem like a weakening investment. However many financial experts believe that the market setbacks are only temporary.

If you are not retiring anytime soon, you only have a “paper-loss” not an actual loss. If you are close to retirement and market volatility makes you nervous you may consider shifting some of your retirement investments to less risky investments.

Whether you stay invested in the markets may just depend upon your timing.


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