Don’t Invest in the Stock Market

Posted by Mrs Money on March 7th, 2011

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talk, telling me that he was getting some stock certificates that he hadn’t accessed in years.  He was going to sell his stock.  He was an older gentleman, probably in his early seventies.  He then proceeded to tell me that he lost so much money in the stock market that he’d advise people to never invest in the stock market.  I made the remark that everyone tells me that I’m young, so I shouldn’t worry about the volatility of the stock market because I’ve got a long time to weather the ups and downs.

He told me at one point he had been making $14,000 a month from the stock market alone.  He didn’t disclose how much money he invested, but that was his gain monthly from investing in the stock market.  Crazy. I can’t even imagine earning $14,000 a month without having to do any work to earn it.

In 2001 after the 9-11 attacks on the World Trade Center, he lost 50% of his investment value.  Instead of cashing it out, he decided to hold onto it and see exactly how long it would take for the value to come back.  Finally this year he’s caught up and the value of his investments is now equal to what it was ten years ago.  Ten years!

Investing in the stock market has always scared me.  I don’t like the feeling of being vulnerable.  I do have a Roth IRA that is invested in mutual funds, and part of my 401k through work is also invested in different bonds, money market funds, and stocks.  I’ve got a pretty good investment mix, so it’s not like I’ve got all my eggs in one basket.

I feel safer when I invest any extra money into a savings account.  The money is liquid and if I ever need it, I have access to it.  With a money market or regular savings account, I earn interest and my principal is protected.  I’m guaranteed I’m not going to lose money in our savings account.  Granted, the interest rate probably isn’t as high as the rate of inflation, but that’s okay.

One of the most important things about personal finance and money is that you’ve got to do whatever makes you feel safe personally.  If you are comfortable with carrying a responsible amount of debt, that’s fine.  If you choose to do without some things in order to avoid debt, that’s your choice.  You’ve got to do whatever makes you happy.  I try my hardest to find a happy balance between being frugal and living life.  It’s not always easy, but I figure that everything will work out in the end, so I shouldn’t stress too much about it.  Easier said than done.

How do you feel about investing in the stock market?  Does it make you nervous, or do you love investing?

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5 Responses to “Don’t Invest in the Stock Market”


  1. “Granted, the interest rate probably isn’t as high as the rate of inflation, but that’s okay.”

    How is a guaranteed loss “OK”?!

    Let’s compare that with a gentleman in his 70′s:

    He was making $14k a month (probably in a mixture of capital appreciation and dividends) because he acquired stocks and held them for a long time.

    In which case, he most likely rode through the entirety of one of the biggest bull runs in history. The recent falls of 50% (then back to 0%) represent a small reversion to the mean for him.

    In other words, he is probably so far ahead of where he would have been had he stuck to your preferred strategy (i.e. keeping your money in the bank) that it isn’t even funny.

    Run some numbers through a compound growth calculator … better yet, use a monte Carlo analysis retirement tool (comparing a 100% cash/bonds to a say 60% stocks / 40% cash-bonds portfolio) so that you can be, say, 98% confident in the outcome and you’ll see the same for yourself!

    [Reply]

  2. Kacie says:

    I don’t like savings accounts or CDs. It makes me mad that even though I’m earning interest, it’s not enough to even keep up with inflation! UGH! But at the same time, the bulk of our money is in a savings account right now since we’ll need to spend it within a couple of years or less.

    When CD rates go up again, I think I’ll buy a few with our emergency fund since if I do need to cash it out, the loss isn’t that much.

    We have about $1600 in stock which was a company bonus. We’re going to leave it alone and let the dividends grow and hopefully the entire stock as well. I hope it doesn’t ever tank (because that wouldn’t bode too well for my husband’s job anyway!) but if it does it’s not enough that it would be a devastating loss.

    I feel like we have to be aggressive with our retirement accounts since we have such a long way to retirement, and we probably won’t be able to accumulate enough if we were too conservative for too long.

    Still, I consider myself fairly risk-adverse for shorter-term stuff.

    [Reply]

  3. krantcents says:

    I used to invest in real estate in the 70s and 80s. Unlike real estate, I have absolutely no control over the stock market. Having said that, I invest in the stock market mostly through mutual funds. I feel more confident in professional managers than me by myself. If you have a good asset allocation, it will protect you against most tragedies. 9-11 and the recent crash not withstanding! You can invest in bonds or other fixed income choices if you like, but most people invest for growth.

    [Reply]

  4. Jessica07 says:

    If you choose to invest, there’s nothing saying you have to go with stocks. You can always choose mutual funds or bonds. :) Mutual funds are managed by a financial professional, so you can feel more secure in their understanding of your needs and the market. Another option is to look into investment clubs. The knowlege you get through a group, and the fact that you won’t be going through the trials and tribulations of investing on your own may help you feel less vulnerable.

    In the end, though, I agree that you should do what makes you feel the most secure. That’s the whole point of financial planning. That being said, just be sure that you have a plan to help you feel secure now, but will also let you be secure later if you can no longer work.

    [Reply]


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