Posted by MarkB_MI on January 15, 2016 at 18:59:16 from (70.194.9.220):
In Reply to: Stock market posted by 37Chief on January 15, 2016 at 12:28:10:
Stan, over the long run the stock market has always outperformed bonds and fixed-income investments. But in order to make money in stocks, you have to do two things: minimize your expenses and manage your risk.
The way you minimize your expenses is to put your money in a no-load stock mutual fund, typically an S&P 500 index fund. S&P 500 index funds consistently outperform actively-managed funds, primarily because of their lower expenses. Your "investment person" was actually a salesman who made his money off sales commissions, so it was in HIS best interests to churn your account.
The way you manage risk is by "balancing" your accounts between stock funds and bond/fixed income funds. Generally speaking, the older you are the less money you want in stocks. However, it is seldom a good idea to take all you money out of stocks unless you're sure you're about to die. Most folks should keep between 50 and 80 percent of their retirement savings in stocks. I keep 70 percent of my money in stocks.
The way balancing works is that as the stock market moves up and down, you "re-balance" your investments to maintain whatever percentage you've picked. Back in 2007, I had about 80 percent of my money in stocks. When the market crashed, that dropped to about 50 percent. So I just moved money from bonds into stocks to bring the ratio up to 70 percent stocks/30 percent bonds. When the market recovered to its previously levels, I was actually ahead of the game even though the stock market was just at its break-even point.
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