Stock Market
A quick little post. I am sure that many of you are in the same boat as I am and you have watched over the last roughly eight to ten months as your 401K has lost an average of 30% of its value. Or in another way of thinking as the one 401K is relatively new, I have had a net gain of 0% despite a pretty decent amount going into the 401K along with a healthy company match. As you are seeing the decline of your holdings, you are thinking that the stock market is the absolute last place to be putting any additional moneys at this point. I think that is the wrong move at this point, and I am even thankful as an investing for the opportunity to purchase some additional stocks at bargain bin pricing.
First, as I am sure you have heard from anyone that is at all remotely reliable over just about any ten-year period in the history of the stock market it has generally outperformed any other legal investment options. Lets look at a few things to see why I personally think an investment in some stocks at the current time is a really smart thing to do, especially if you have any extra change left over at the end of a given day.
Currently the only absolute for sure no loss investments are those things like bonds, savings accounts, and money markets. Generally these are all tied to interest rates. If you have at all paid attention you will realize that the interests rates have been cut to almost nothing and that is about the rate you will earn on those kinds of secured investments. Further, consider that a lot of savings accounts and banks are now starting to pay nothing without minimum balances of several hundred, if not thousands of dollars.
Also consider that there are several bargains out there in the stock market right now. Actually there were probably better bargains a month or two back, but there are still plenty of bargains left out there. Now when I say bargain, you still need to do some research, accept that there is some risk to your money, and because of that carefully consider things. I know that typically you should avoid individual stocks, but I have a few favorites and I think as longs as you stay well diversified with different companies in different sectors you can be in pretty good shape.
Of course, you could also pursue a mutual fund, but that is whole different topic for another post and not where I am heading with this one. I would suggest companies you are familiar with, but not a company you or a close family member is employed by – keep in mind the diversification goal. Beyond that, I would look for companies that have typically been around long time and I generally prefer to stick with companies that either currently pay dividends or historically have paid dividends. The big thing though is this, stocks have fallen that 30% noted earlier and we are all pretty sure in the next ten to fifteen years it will regain that 30%, perhaps even more.
I would also suggest automatic investments, to help you get into the habit of putting some aside on a regular basis. If you set up as an automatic deduction on a regular basis, you will not be as tempted to short the savings – especially if it comes out of your account at the same time you get paid. Keep in mind with regular investments there will be regular fees, so you may want it to automatically go into a savings accounts and then pull once a month or two for the actual investment. Also a major broker will eat you alive in fees, stick with a discount largely self-service broker, like sharebuilder.com (they have $4.00 per transaction fees and can go even lower depending on options used). Once you make your investments, leave them alone and let them grow, add to them, re-invest the dividends, and watch your nest egg grow.
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