Is now the time to throw conventional investment wisdom out the window? Financial advisers will tell young people to put their retirement investments into funds that have a higher risk. The theory is, the potential for higher gains outweigh the risk because they have time before retirement to recover. As a person gets older, conventional advice tells people to shift more of their funds to lower yield, lower risk investment vehicles. This gives people peace of mind their investments are safe and secure as retirement gets closer. I’m somewhere in the middle of this spectrum, but during a recent review of my investments, I wondered if I should be, even if temporarily, moving some of my safer investments back into a riskier playing field.
The rate of return for my stock market funds has been phenomenal this year. Year to date, my stock market funds have enjoyed a 19% increase. The Dow Jones is actually up 22.6% since January 1st. This is exceptional growth for a single year.
Reasons To Play The Market
There is a couple of reasons one might decide at least for the short term, more stock market growth is close to a sure thing:
- Growth Potential: Moving extra funds into riskier stock investments temporarily could yield substantial additional gains. These gains, even after moved back to safer vehicles, would be compounded over time reaping huge rewards by the time retirement age is reached.
- Markets Like Trump: Whether President Trump’s policies really will help businesses remains to be seen, but the stock market seems to think they will. With the tax reform bill making its way through Congress, there seems to be more stock market potential to be had.
Reasons To Stay The Course
- Growth Not Guaranteed: Something could happen on a global scale tomorrow that crashes the market. This growth has been going on for awhile, and the markets could take a downturn at any time. You can use stock screeners and other similar tools to minimize your risk though.
- Instability: It’s obvious there is a feeling of instability around the current state of the nation. Investigations into Russian collusion and potential conflicts with other nations always makes the markets jittery.
I’m certainly not qualified to give investment advice, this is just a question I’m currently asking myself. I’ve got over 20 years until retirement, so I’ve got some time to either recover from a loss or let some extra gains grow. It’s worth at least giving it some thought.
How about you, Clever Friends, have you thought about putting a little extra cash in play given the phenomenal gains of the stock market this year?