When the stock market sells off, as it did in late July and early August, there is an inevitable surge in commentary on the riskiness of U.S. retirement accounts. The main worry is that retirement investors are taking on too much risk and that retirement assets should be invested in “safer” securities or programs.
From my perspective, many such criticisms seem unduly focused on the short run.
I’ve been investing in stocks through mutual funds for more than 30 years. I’ve known all along that periodic swoons come with the territory. I’ve experienced the October 1987 crash, the 2000–2002 bursting of the tech-stock bubble, and the kerflop of stocks accompanying the 2007–2009 credit crisis and “Great Recession.”
Even so, it’s never easy to see a fall in stocks slice into one’s retirement portfolio. But if getting older has an upside, it’s that experience has taught me some coping mechanisms.
Everyone who is not on vacation appears to be focused on the uncertainty created by the lack of a resolution to the most recent government funding crisis. I wish I could add some value with respect to the discussion of the “default” issue or, even better, predict what the final outcome will be. I can’t.
And of course my own views on the subject ultimately don’t matter much. In fact, they probably matter even less than the views of people we’re all watching on TV and reading in the press who are paid on the basis of how well they can attract and retain attention in the mainstream media.
This morning I saw on a website that the spot price of gold had soared to $1,600 an ounce, up over 30% in the past year. What can we as investors say conclusively say about gold? Two things, I think: First, now seems exactly the wrong time to be thinking about gold as an inflation hedge. Second, now is probably not a good time to be buying gold jewelry, if such is your passion.
Among “gold bugs,” the standard argument for buying gold is the risk of financial Armageddon: If the Federal Reserve mismanages the money supply, the United States will be engulfed by hyperinflation and the dollar will be debased. Only real assets like gold will preserve their purchasing power.
A few months ago, my wife and I opened a small savings account for our young children to help teach them the power of saving. Compound interest. All that good stuff.
We talked about taking their pennies, dimes, and birthday checks from family and friends and depositing them down at the local savings institution. It’s always neat to see the coin machine sort all those round pieces of metal in a fraction of the time it used to take me to put them into paper rolls. (There used to be some long rainy days growing up.)
