by Stock tips should be based on true diversification. The world is driven primarily by money. Stock prices 401k gold IRA are influenced mainly by ultra-rich investors who move their money around in major asset classes. There are many cycles in which money flows to various asset classes. While stocks have increased by 10% over the long term, other major asset types offer higher returns and lower risk. However, some may be more successful than others. You will need both safety as well as earnings if your retirement plans are to be successful.
Simple stock investments are not sufficient, even if diversification is done among different stocks. What happens if 70 million baby boomers attempt to retire all at once in the US and all of them start taking money out the stock market? Smart people have been using the “age wave” theory to predict a stock-market top in 2008. It was believed that the baby boomers would be the largest holders of stock market capital, and that they would sell stocks gradually to make way for more stable return instruments such as bonds. Problem is, because they knew this, they would sell in large quantities to get an edge over everyone else.
Global economic stress is evident with high levels of unemployment not only in the US but also in Europe and other parts of the world. But there is nothing to fear. Money that has gone out of the stock markets can only go in one direction: another.
These are some locations it could go:
Bonds/Treasuries Cash/Currency
Gold/Silver/Precious metals
Stocks/Options/Futures/Paper assets
It can also be used to purchase real estate. But real estate is a very special asset class. Real estate is built on leverage. It is unique in that people who invest money in real property actually increase their leverage. A million-dollar property might require 100,000, so they will need somewhere to put it. Real estate is a distinct asset class. However, it can create significant currency that will either remain in currency or move to another asset class. If real estate is not in demand, and you have your house, you’ll have a significant amount of your wealth already invested in your home.
You would have a 14% drop in your net worth if all your money was invested in the S&P index funds over the last 10 years. However, many people are more down than that as they continue to invest in stocks as they rise and because the economy is doing well. This means that most people’s money is going to the top while they have less money to invest when markets fall. A S&P Index fund would be considered extremely diverse as it has many stocks. Problem is, the S&P Index is not just one stock but many stocks. Although it is diversified among paper assets because it can invest in different sectors (which I agree with as a good safety practice among stocks), it’s not diversified among other asset classes.