Investing in Stocks May Be Riskier Than You Think
Investing in Stocks May Be Risky: Alerts warn against high-risk, high-yield investments, though investors are anxious to grow retirement nest eggs quickly
have already noted in several investor alerts warning against high-risk, high-yield investment
products, many of today’s investors are becoming increasingly anxious
to grow their retirement nest eggs quickly in order to make up for the
previous years’ losses. But, the need to obtain fast returns often
leads to risky investing choices, more losses, and sometimes even investment fraud.
Investing primarily in stocks is one such risky investment choice, warns a recent Wall Street Journal article. Despite the lessons supposedly learned over the past few years, investors are once again looking to stocks to meet their pressing retirement goals. This is particularly true in light of the fact that the Federal Reserve has announced it plans to keep interest rates low through 2014 – a move that severely limits the appeal of safer investment products like some bonds.
“Despite the assurances of the financial industry, stocks arealways a risky investment, and the longer you hold them, the better your chances of getting blindsided by a downturn,” wrote Drs. Bodie and Taqqu in the article. “The usual way of mitigating that risk, diversification, holds no guarantees, either—for the simple reason that investments don't always move the way we want in relation to one another.”
According to the article, stocks are risky for many reasons, including the regular occurrence of bear markets, and the (relatively new) tendency of many different markets to fluctuate together rather than in counterpoint. Want a safer way to grow your investments?
“First, forget the idea of ‘catching up,’” advises Dr. Bodie and Taqqu.
To learn more, read the full article here.