If you are like most people, you sometimes wonder if the stock market is really the best place to invest your hard-earned dollars. The stock market can be scary to the uninformed! There is no shortage of pundits, commentators, and bloggers who are willing to proclaim that the market is about to crash, that stocks will never go higher, and that the only way to be safe is to buy their newsletter (or worse, buy the silver, gold, insurance or annuity product they are selling!).
It is natural to feel some uncertainty about investments in the market. Stocks are volatile, which means the value of your investments can bounce up and down from day to day. The daily movements of stocks might be unpredictable, but the long term trends of the market are clear. Academic research and over 100 years of data prove that investing in the great companies in America and the world is the best way to create wealth from personal savings and to protect your purchasing power in retirement.
Plan for the journey, not the roadblocks
Irrational fear of market volatility can be damaging to your financial health. Fear often leads to inaction, and this “investment paralysis” can spill over into other areas of the financial planning process. The worst thing to do is to allow fear of the markets to stop you from doing all of the other things you need to do to achieve your goals: planning your spending and savings, risk management, estate planning, tax planning, and completing the other tasks on your personal financial planning action list.
If you don’t have an action list, the first thing to do is to get one! Create one yourself, or find a credentialed professional who will give you unbiased advice. Thinking about your life goals is a great place to start. From there, setting financial goals will be easier, and you will then be able to make better decisions and stick with your financial plan.
Focus on the goal, not the journey
Investing in the stock market is a means to an end. For most of us, the goal is to achieve financial independence – the point where we work because we want to, not because we have to – and then maintain our standard of living in a long retirement. The risk of running out of money in retirement is the biggest challenge we will face during this journey. Investing in stocks continues to be the best way to guard against this risk.