“Stock trading remains in a slide after ’08 crisis” – New York Times
What does the attached article’s information suggest? Perhaps the assumption that the stock market always grows should be examined, both for direction and extent. Decreasing small investor participation may add to volatility. Increasing automated trading (“Flash Trading”) may add to volatility. There’s little question that, over a long period, the stock market will go up. The question is, how long a period, and to what level?
The financial landscape has carried assumptions on the part of many investors that the stock market, over time, rises strongly; that assumption has carried hopes that in simply putting money into the market, retirement finance will take care of itself.
During the “distribution phase” of our financial lives (i.e. retirement), the volatility of the stock market can be problematic for those that do, and will, withdraw funds to cover costs. What if you need to liquidate some holdings to buy a new roof? Will you be selling at the highs, or the lows?
The vast majority of financial institutions (i.e. stock broker and fund firms) spend little effort in drawing an investor’s attention to creating a portfolio that might create a resistance to volatility and its detrimental effects.
The structuring of these portfolios should be started many years before retirement, in contrast to the typical “age based investing” that became popular in the 1990’s. There should be a central low-volatility “support” core in one’s planning, with stock investment as a piece, and ratios of such to be determined.
If you have an investment advisor, you may want to encourage discussions to chart a course toward volatility immunity.