Why invest in the stock market? Because it can be more dangerous not to

My first 401(k) plan account began on the eve of the greatest financial recession in the United States since the Great Depression, like many other millennials who began their employment at the close of the previous decade. For millions of new investors, the stock market crisis of 2008 was enough to scare many away from investing forever.

This is a horrible strategy. Over the course of your career, putting all of your retirement and other cash into a savings account rather than the stock market can lose you millions of dollars.

While there is danger in the stock market, it should not be so frightening that you shun it entirely.

The stock market scares millennials.

According to a recent report from the Federal Reserve Bank of St. Louis, only three out of every five millennials are invested in the stock market in any way. As a result, 40% of millennials are missing out. Balances of individuals who are invested are significantly lower than those of Generation X and prior generations.

For those millennials who are missing out, this is a major issue. The stock market has recovered from the Great Recession and then some since it touched bottom. If you didn’t invest during the longest Bull Market in history, you missed out. The markets began to rise on March 9, 2009, and in September 2018, they set a new record of 3,453 days of advances. That market is still on a roll.

Why should you put money into the stock market? It’s a secure place to put your money for the long haul.

People are terrified of the stock market for a variety of reasons, one of which is that they don’t comprehend it. While films like Wall Street, Boiler Room, and The Wolf of Wall Street portray the stock market as exciting and thrilling, experts believe that trading should be a tedious experience.

The S&P 500 allows investors to invest in 500 of the country’s largest firms with a single investment. When looking at the S&P 500 index over a lengthy period of time, you may expect annual returns of roughly 10%.

There are years that are good and years that are horrible. Volatility is undeniably present in the markets. However, if you have a long-term objective in mind, such as retirement, the stock market is the ideal place to invest.

Short-term ambitions should be funded with cash from savings.

There are times when millennials and other investors would be wise to stay away from the stock market. If the money you want to grow is for a down payment on a house, for example, you might not have enough time to wait for stock market changes before buying. A high-yield savings account is best for a reasonably short-term goal like that.

As you approach closer to retirement, it’s generally a good idea to change your investment strategy away from stocks and toward bonds and other fixed-income products. If you’ll need the money in a few years or fewer, you shouldn’t invest it in the stock market.

This is why the majority of well-rounded personal financial plans involve a combination of stocks, bonds, and cash savings. I have a cash emergency reserve as well as a developing fund to buy an investment property in the future. The majority of my family’s other assets are placed in a mix of retirement and taxable investment accounts with long-term goals in mind. Approximately 80% of my family’s liquid assets are currently invested in the stock market. The remaining 80% is paid in cash.

Long-term investments with a diverse portfolio are usually a safe bet.

Yes, there is risk in the stock market. A varied, long-term investing plan that will serve you well no matter what the future brings is the key to stock market success. For many people, a simple index fund portfolio is sufficient. There’s no need to pick individual stocks or complicate your investments.

If you’re not sure where to begin, try a target date fund, which is comprised of a variety of low-cost index funds chosen by a professional investment manager based on your goal retirement age. Acorns and robo-advisors like Betterment and Schwab Intelligent Portfolio are other viable options for having your investments chosen for you.

Don’t ignore or stay on the sidelines when it comes to the stock market. If you do, you could be in for a major surprise when it comes to your golden years.


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