Younger Worker-Investors Going Astray
May 03 2011
I read article after article about how younger workers don’t trust investing in stocks for their future. By stocks, I’m talking about the stock mutual funds in a 401k or the TSP. This is explained by the turbulent stock market in the last decade. The non-stock-investors point to their account balances as their proof. What a shame. These investors are making a mistake. A big mistake.
I doubt retirement in the future will be free. It will take lots of money to retire in the future. Inflation is a constant. So where do these non-stock-investors think the money will come from? Money comes from working or investments. I’m going to assume they don’t believe their future will be funded by the government. Many younger workers already question the fiscal stability of Social Security. And pensions?…They’re a thing of the past.
Is working for the rest of their lives part of their game plan? Things out of your control can change that game plan. Health, ability, knowledge, old age issues, you name it. It’s hard to project how old age will change your outlook of life until you are actually entering old age. My outlook on past, present and future life has taken on an entirely different perspective as I enter my mid-50s than I had in my 30s. Of course people in their 70/80s have a completely different perspective than me. Point being, working as a game plan is impacted by life and you can’t predict that. Only investments provide life options for retirement.
Investments allow a person to have choices in the future—work (full-time/part-time) or not work. To build the wealth required for a comfortable retirement while earning average paychecks and paying life’s bills, history indicates average people must invest in assets that have returns that outpace inflation and taxes. This aspect alone requires investments in stocks, properties or entrepreneurship—or another way to think about it is ownership. Only ownership investments build wealth. Anything else is speculation or won’t keep pace with inflation and taxes. You can’t just sock away enough money to retire; your money has to work harder than you do to build wealth.
Younger workers who follow the belief that stocks aren’t in their future will be sorry when the future arrives. If you aren’t in stocks, properties or self-employed, where are you going to put your money and still build wealth? What other investments have consistently outpaced inflation and taxes over the long haul? I suggest those stock adverse workers out there are drawing conclusions about the stock market from a very limited perspective.
If your only investment history has been during the 2000s, your perspective is skewed. The stock market in the 2000s has been turbulent but flat. We basically hovered around the same level from 1999 to present. This is not new. Flat market periods are common in the history of the U.S. Flat markets provide launch pads for future growth. The last flat market was a 16 year period prior to the stock market taking off in the 1980s and 90s. And besides, even in a flat market, investment portfolios can grow if you implement proven strategies.
You have lots to learn about investing if you think stocks aren’t for you. This article doesn’t even scratch the surface. Look for the other investment articles in this blog to help understand the markets and implement reliable investment strategies. It’s your future on the line.
