Retirement Investing Myths vs. Reality: Why Americans Fear the Market
A 2019 survey found that 31% of Americans don’t invest because they think it’s risky, but 39% felt it was reasonable to think of the lottery jackpot as a potential means of retirement.
If that survey was taken today, it light of recent market volatility, the numbers might even be higher. To show how out of whack this mindset is, there’s a fun graphic from Invesco, showing the odds of winning at gambling versus the odds of winning in the stock market.
The best odds at a casino can be found at the Baccarat table. You’ve got a 48.8% chance of winning on any given hand. Craps is right behind that at 48.6%, and play one hand of blackjack and you’ve got a 48% chance of winning. It’s truly a flip of the coin.
Stock Market Success Rates: The Long-Term Advantage Revealed
But, using the Dow Jones Industrial average as our measurement, from 1901, through 2024, if you stayed invested for just one year, your odds are dramatically better. The Dow has been positive 73% of the time. The number soars to 86% over any 3 year period, 93% for any 5-year span, 98% over 10 years, and 99.9% if you are in it for the long-term of 15 years.
Past performance does not guarantee future results. Most of you probably know investing in the market is a better retirement plan that letting it ride at the casino. The chart does highlight the importance of investing for the long term, and not making an emotional decision when the market drops sharply in the short term. If you are still working, and making contributions to your 401k, the volatility is your friend. You have the chance to buy more shares while prices are lower. Market volatility is good.
Retirement Strategy: Protecting Your Wealth Through Market Fluctuations
Even in retirement, you shouldn’t fear market volatility, IF, you have the right investment strategy.
Another Invesco chart is really busy but shows us the S&P 500 returns every year from 1989 through last year.
At the top are the calendar year returns. At the bottom are the largest intra-year declines in each year. In other words, the max pullback. The median annualized total return is 15.4%. But, the median intra-year price decline is 9.6%. Simply put, the market has performed very well on average, but, usually has a pretty significant drop in every single calendar year.
No one knows when that pullback is going to happen. If you are in retirement, and selling stock to use as income, when the pullback comes, that could have devastating effects on your portfolio, and your retirement. This is called sequence of returns risk. This is when market volatility is bad. You want an investment strategy that uses conservative investments for current income, and growth investments for future income. That protects your assets against those pullbacks. If you would like to learn more about the GenWealth strategy we use in our Ready to Retire Process, give our team a call at 866-653-PLAN.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Advisor Alliance. Independent Advisor Alliance and GenWealth Financial Advisors are separate entities from LPL Financial.
