Why You Need to Make Your Money Work Harder for Longer
Like many of us in our youths… I was a bit of a risk taker.
That applied to my early investing strategies as well.
Heck, I didn’t have much so what did I really have to lose, right? I even hit on some far-fetched speculations which put a nice chunk of change in my pocket.
Truth be told, though, I also took a lot of losses. More losses than wins. But I did the right thing, you see.
Age-Related Investing Explained
The conventional age-related investing strategy tells us to do this…
When you’re young go all in on high-growth, higher-risk stocks. The thinking is in your 20s and even early 30s you’ll have plenty of time to make up for any losses. And if you hit big on something… you’re well ahead of the curve.
As the years pass and you move into your 40s and 50s conventional wisdom suggests a significant reallocation of funds away from riskier stocks and into more stable assets like Treasury bonds.
As you reach the standard retirement age of 65 conventional wisdom would tell us to almost entirely rebalance our investment into bonds and similar safe-haven securities.
I will tell you right now the conventional wisdom is bunk…
65 or Older? You Better Still Be in the Stock Market!
Let’s look at some raw numbers.
The current 2-year and 10-year Treasury yields are a pathetic 1.58% and 1.67%, respectively. A far cry from the amazing 30% the S&P returned in 2019.
And if you think those piddly single-digit returns will keep you afloat for 20–30 years after you retire, you’re in for a rude awakening…
The simple fact is that Americans are living longer and longer, which means you need to ensure your money works harder and longer for you too.
That means ditching (or at the very least tweaking) our old age-related ideas of investing.
By the time you retire, be it at 65 or not, you need a fair portion of your investments still working hard to grow your wealth.
That means staying partially invested in stocks for as long as you can.
The simplest way to do this with minimal downside risk is with an S&P index fund.
If you take some of your current bond allocation and simply put it in an S&P index fund, you will see exponentially higher returns over the years when compared with the 1, 2 or 3% gains you may get with Treasuries.
That’s because in any given decade your expected annual 10-year return from the S&P is 10%. And that’s a heck of a lot better than what Treasuries will do for the same amount of time.
Simply put, whether you are 25 or 65 stocks are the best game in town for growing your wealth and planning for retirement.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch