We get a lot of questions about owning stocks in a down market and the uncertainty that exists. I address this in my latest column and share my reasons for the consideration of common stocks despite economic volatility. I use the word “bullish” in my reasons because I base my findings on hard numbers. “It is an acceptance that over the long haul the appreciation in common stocks has closely tracked the collective growth of underlying companies that make up the stock market.” I make a point to explain that today’s economic climate is entirely different then when I was working on Wall Street 33 years ago. As investors in today’s market, we must embrace the belief that a significant allocation to common stocks is necessary to generate any type of meaningful long-term returns.
The Three Principles
1. Save for a rainy day.
Develop a long term financial plan.
2. Don’t put all your eggs in one basket.
Diversify in different asset classes.
3. There is no such thing as a free lunch.
Capture the entire return of each basket, or asset class, through low cost index funds.
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