Investing for Retirement Requires a Disciplined Approach
by Jerome Clark
Over the past decade, equity investors have been blindsided by two severe bear markets, a global financial crisis, and the worst recession since the 1930s. As a result, they have seen generally meager investment returns.
So it is not surprising that many had been fleeing stocks and equity mutual funds. Since the stock market peaked in October 2007, industry-wide net outflows from equity mutual funds totaled several hundred billion dollars through 2010.
Historically, investors often have abandoned the stock market during steep downturns, missing out on subsequent recoveries. This time, the bulk of the outflows occurred in 2008, before the S&P 500 index skyrocketed 93% (from March 9, 2009, through the end of 2010).
Moreover, an annual survey by the Investment Company Institute shows that the percentage of investors willing to take above-average or substantial risk has declined steadily over the past decade through 2009, especially among young investors.
Those saving for long-term goals such as retirement, however, should consider the implications of reacting to recent events by reducing their equity allocations—and therefore reducing the growth potential of their portfolios.
To read more, please become an AAII member or CLICK HERE.