Saturday, October 3, 2009

Worst decade ever

the S.& P. 500 is on track for its worst decade ever. I still think this is a sign that this is a great time for me to invest in stocks! Typically when demand for stocks is low returns are high, and when demand is high returns are low. People are definitely afraid enough of stocks right now for demand to be low(then again I thought the same thing a year and a half ago, so my crystal ball is pretty muddy).

What this did do, is convince me that stocks should never be invested in for less than twenty years. There is a risk of their value falling over this time scale, so other investments like bonds make the most sense.

Speaking of bonds, I am becoming more and more convinced of two things: Most investors buy too few of them when investing in retirement, and now is a horrible time to buy bonds. The first I am convinced of from watching how much worse investors with primarily stocks did in the last two years. The rule that bond % should match age in retirement savings makes a lot of sense to me. You want to trap gains made in stocks over the long-run into bonds. The second makes sense for the same reason that I think stocks are a good bet. Demand for bonds is really high. This is pushing returns for bonds down, right when there is a nice rally in the stock market.

No comments: