“Frugality is admirable, but fear can be crippling to your wealth.”
~ Brad Klontz
Financial columnist, Kathy Kristof (author of Investing 101) believes that Gen Y might never retire because our current rocky market is causing young investors to shy away from aggressive and risky portfolios. As a result, 80% of 20-somethings are not investing in 401K’s, and instead, we are relying on bank accounts, Treasury’s or gold to keep our money safe. While this may seem like a good idea for short term investors, the best thing we can do is look at what may be the “worst decade for stocks in history” as the best decade for young investors.
Back during the Great Depression, “between 1929 and 1932, stocks lost roughly 85% of their value. But, in 1933, prices roared back, soaring nearly 54%. The next year, prices were down slightly again, but in 1935 and 1936, stock prices rocketed 48% and 34%, respectively.”
Just think of what the future holds this time around!
And Kathy reminds us; “If you invested $250 a month, or $3,000 a year, in bank deposits yielding 3.7% on average, you’d have $275,000 some 40 years later when you wanted to retire. If you invested the same $250 but earned the 11.67% average of small-company stocks, you’d have $2.6 million.”
…Where would you rather be in 40 years?
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The old paradigm is dead. Houses aren’t investments, they’re places to live. The stock market is easily manipulated and it’s the small investor (401k type) who ends up on the downside.