Many people plan on investing some of their money so they can have enough to live on when they retire. With the poor economy many people have been starting to learn that that isn’t always a safe way to go. Or is it? Is retirement in the stockmarket a viable option and if so, what pitfalls do you need to be on the lookout for?
The truth is that retirement in the stockmarket is a great option but not the way most people do it. Yes, you can grow your money and help prepare for retirement by investing in the stock market but if you don’t know what you are doing and / or you rely on some «professional» to do it all for you, you may well find yourself in trouble.
I can’t believe it when I hear «experts» telling their clients to sit tight and leave their money in the market even when it is obvious that everything is going downhill. They tell their clients that as long as they leave their money where it is all their losses are only «paper losses» and that they can recoup those losses when the market rebounds.
That is the common way of thinking… and it is wrong. Here is why:
1. First of all it is true that based on history the market will rebound at some point and you will probably get your money back. But will you get it back in time? What if you are set to retire in a few years, do you have time to recoup everything that you’ve lost?
Maybe, but maybe not. No one can accurately predict when things will turn around. By leaving your money and just riding out the storm, you could permanently damage your retirement savings.
2. Instead of «riding out the storm» and recouping your lost income down the road, why not get out when it is apparent things are moving in the wrong direction? That way instead of having to wait possibly years for the market to rebound and then years more just to get back to where you were, you won’t have lost anything.
I guess you might loss a little profit by pulling out early when it appears trouble is brewing but you most likely won’t lose as much as if you just left your money in the market and hoped for the best.
Then you can take that money and invest it is some other investment that is actually going up in value even as the stock market tanks.
Isn’t it better to continue to grow your money than to leave it in the market and have to try and regain any ground you’ve lost when things turn around? This is the way the truly successful investors do it and you may be wise to follow their lead.
3. And last but not least, consider who is doing the investing for you. Are they paid solely by commission? If so it is in their best interest (not yours) to leave your money in the market. If they don’t make trades they don’t make money so of course they would recommend that you keep your money in the markets.
The stock market can be a great way to put your money to work for you and increase your wealth. But, like most other things in life, if you don’t do it the right way it can turn into a nightmare. Retirement in the stockmarket can work but you have to always keep an eye on your money and who is investing it for you.