As a Generation X investor who still has 25 years or more to go before I retire, I feel like I'm stuck with stocks. Now that the government seems to have averted the so-called "fiscal cliff," and moved onto the debt ceiling, I have to get back to investing for my retirement. For that several years, some financial experts have claimed the "new normal" is skimpy returns on stock market investments.
According to a recent article by Bloomberg, that philosophy has proven to be wrong as stocks and bonds have recently rallied like it's the 1990s. Although my personal investment returns tumbled in recent years, I have had no option but to ride out the storm.
Searching for a dividend fix
To help lessen the blow when the stock market tanks, my "new normal" investment strategy is to pick stocks and exchange traded funds ETFS that pay dividends. When the values were down last year, I reinvested my dividends. Now that the stock and ETFS prices are higher, I'm starting to a see a better return on my money.
Moving past the baby boom bust
Like many people in my generation, I'm nervous about baby boomers taking all of their money out of the stock market as they retire. However, some experts say most individual investors fled the stock market about 5 years ago and never looked back. By the time I need to take money out of my retirement accounts, few baby boomers will be around to throw a wrench in the stock market.
Getting real about returns
I used to hear financial experts claim people could expect a 10 to 20 percent return on their money if they invested in stocks. Now most financial advisors throw out a more conservative estimate of about 5 percent, being careful not to "guarantee" any return. Even though I also have low expectations about what kind of return I'll get on my money, I know I'm fairly certain it will be higher than 2.75 percent. With my mortgage interest rate so incredibly low, I have to be honest with myself. I'm far better off investing my money in stocks rather than paying down my mortgage at age 40 when my interest rate is below 3 percent. I don't know how long low interest rates will be the norm, which is why I'm refinancing.
Even though I could invest in real estate, gold and silver coins, bonds, antiques or a business, I still favor stocks. I may grumble and moan about the volatility in the stock market and the occasion stock market crash, but I still know I'm far better off investing in stocks. A lot can be said about the pros and cons of investing in stocks. For me, it's all about waiting it out over the long haul when even a much-hated initial public offering such as Facebook becomes an eventual winner.
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