Commentary: Instead of trying to buy stocks based on market ups or downs, here's an age-based look at when you should buy stocks.
Whether the stock market is rising, falling or floundering, as it has been for the past few months, the question investors always ask is: “How much should I own in stocks?”
But the past few months have been bumpy. Through June of this year, the S&P 500 Index is up about 3 percent, including dividends. International stocks, measured by the MSCI EAFE — an index that measures stock market performance for developed countries outside of the United States and Canada — are down just more than 1 percent.
By way of example, a 30-year-old who invests $1,000 per month and earns an average 7 percent return on her stock portfolio will have accumulated about $1.2 million by the age of 60. At a 5 percent average return, her portfolio would be $830,000, so this extra return compounded over many years does add up.Stress about money can help you manage itFor millennials looking to retire early, there is an argument for owning part of their portfolio in more conservative investments.
For example, a person saving $1,000 per month for the last 10 years of their retirement, earning 7 percent annually, will accumulate another $173,000 in their nest egg. However, if they double their monthly savings to $2,000 and only earn 5 percent for the last 10 years of their retirement, will have an extra $310,000 by the time they retire.
Many people will continue to work well into their 70s because they love what they do or want to stay engaged with other professionals. But they still need a game plan when the paycheck ends, especially to cover any large expenses, such as long-term health care.
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