Many people stop investing in stocks as they near their retirement age. While it’s not wrong to invest in more conservative options as you get older, it’s important to hold at least a few stocks in your portfolio to protect yourself financially against inflation. Here are some reasons why stocks make a good buy even for older investors.
- You May Live a Lot Longer: The reality is that life expectancy has been on the rise. So, most retirees will need money to last them at least 30 years, if not more. The only way to ensure your money lasts for this long is by investing in some stocks.
- Not All Stocks Are Risky: Stocks have a reputation for being volatile and risky investments, but this is not always true. Many stocks, especially those of large-cap companies, are relatively safe and can bring stability to one’s investment portfolio. Dividend stocks are a good option since they generate a steady source of income for the investor, and their prices don’t fall or rise dramatically. So, as you get older, instead of laying off stocks entirely, look for ones that are more stable.
- Markets Will Pick Up: It’s not uncommon for the market to take a big dive. But, fortunately, it also always rises. So, as long as you stay invested, you will likely earn back all the money you lost in a market downturn (and more possibly) in the following years.
- Diversify Your Stocks: Just because stocks are a good option to have in your portfolio, it doesn’t mean your portfolio needs to comprise only stocks. They could just comprise 20-25% of your portfolio, thus helping grow your money without adding too much risk.
- Cash and Bonds Don’t Offer the Best Returns: While cash and bonds are relatively safe options, they, unfortunately, do not offer good returns, and it is very likely that inflation will outpace the returns you get on these instruments. This is why it’s important for you to also invest in stocks.
Investing money in the stocks market and witnessing it grow over time can be extremely fun and rewarding. The good news is that once you retire, you’ll have more time to watch over your investments and make the right decisions with regard to your stocks.