Anyone of us needs to save money and grow a wealth to ensure we will have enough financial resources in our senior years. The way you invest your money to do that is crucial. Very often we don’t just make sure we will be able to perceive a satisfactory enough retirement income but want more.
That is why the stock market and other apparently promising investment vehicles have always appealed many investors. The only great thing about them is that we feel the pleasure of investing money but we are not able at all to ensure a satisfactory retirement income to cover our expenses and protect our family’s finances.
Unfortunately, people who risk to lose a considerable amount of money on risky investments are not only those who plan their retirement on their own but also those who trust their financial advisor suggestions. An investment professional is in fact likely to suggest you any type of investment option, including the riskiest ones, such as stock market.
The truth about stock market
Stock market is one of the most popular investment options and, if the economy is healthy enough, it can generate huge gains. However, the same fact that stock market is strictly connected to the market performance makes this investment vehicle very risky.
Risks derive from the decline of the market, but are also connected to other key factors you probably are not aware of. Tracking the market indices is the most immediate way to keep under control the current performance of the market in order to make sure your investments are currently doing well. But it’s not all about that.
The real performance of the stock market, for example, can only be seen over time. Inflation, in fact, regularly brings decreases in the value of the investments, so if you are gaining a considerable return now you will lose part of the gains over time.
It is easy to understand that stock market has all the characteristics of the risky investment for retirees or people who are going to retire: low investment value and no protection against the whims of the market. These are two fundamental things to take into consideration before choosing stock market as your investment vehicle.
Is stock market really risky?
Despite the negative aspects of this investment vehicle, which is classified under the category of “risk class investment products”, you might be still convinced that it can prove being a very good option to grow a wealth for your retirement. After all, is inflation a real danger? Many people who reaped considerable gains from stock market, so why shouldn’t you?
The answers to all these questions can be provided by several statistics. First of all, as any financial advisor will show you, market performance has considerably improved over the last 12 years. However, over the same period dollar has lost purchasing power by average 2,67% each year, which means that if inflation rate will remain unaltered or even increase in the next years, your retirement budget will be seriously at risk.
Federica is a guest blogger from First Senior Financial Group, providing safe investment options to people at or near retirement with a team of Philadelphia financial advisors.