Have you given up on the stock market like a large portion of Americans? I’m getting ready to dive in.
According to a survey by a large financial company, 58% of Americans have lost faith in the stock market and 44% believe they will never invest in the stock market again. While the first question should be whether the sample of over 1,000 respondents included in this survey represent the country as a whole, assuming the study was well-designed and the survey is accurate, a lot of people are rightly dissuaded by the recession, the perception of Wall Street, and recent stock market performance: On Wednesday, the Dow and S&P 500 had steeper losses than they’ve had in one day in almost a year.
I can’t predict the future, but avoiding the stock market will a problem eventually. For all I know, we could be heading for a decade or two of no growth in the stock market, but eventually stock market performance will most likely return to the averages. To return to an average after a period of bad performance, the stock market must experience a period of great performance, and that’s not something an investor should avoid.
You may have heard stock prognosticators say, “Sell in May and walk away,” referring to historically sluggish stock market performance over the summer months. Analysts seem to be calling for more poor returns this summer, though analysts seem to be influenced more by recent history than predictions for the future. Nevertheless, this anticipated low point may be a good chance to buy in.
I’ve been avoiding the stock market for several months now, investing only with a monthly contribution to my Individual 401(k). I’ve initiated an automated investment plan than takes some of the cash I have in money market funds in my IRA at Vanguard and moves it over to the Total Stock Market Index fund over the course of the next eight weeks.
Published or updated June 2, 2011.