My worry about equities/shares/stocks is that there *is* that level of volatility but, until you actually sell the share, it's share price is pretty much irrelevant (if I bought for 10 dollars five years ago and it's worth 20 dollars now as I sell it, then I've doubled my money, regardless of whether it was 1 dollar or 100 dollars last month)
The problem with looking at a market as a whole is that almost nobody sells when the stock has reached the peak value (unless a crash is just about to happen!) so if you look at a large basket of various shares bought twenty years ago, some have gone down, some have gone up, and the long term view you espouse is that the average goes up over time (even if the actual value is volatile) ... but you have to choose every time you want to make a social security payment which stocks to sell to cover the shortfall ... do you sell the poorly performing shares? (only to cut your losses!), do you sell the best performing shares (and lose out on future growth, after all if someone is buying them, they are betting they are going to go up in value!) or do you sell shares that are performing not so well?
There are some very well paid people out there trying to make those guesses now for pension funds and other investment vehicles and (aside from insider trading) it really is just guesswork.
My worry (in summary) is that "the stock market will earn a higher rate of return" may not be true long term, particularly if you're having to take out cash regularly ... and it's clear that governments are really bad at long term investments versus short term "bread and circuses" *precisely due* to the way "democracy" is practiced in the US and UK.
I've just been exchanging emails with a radio show host that believes the US government shouldn't be sending *any* money to the Indian Ocean disaster since it is US taxpayers money and meant to be spent on US taxpayers, and if individuals want to help the Tsunami appeals, then they can each decide how much they want to give without the government telling them. He doesn't understand international trade, international relations or how that precise attitude is one likely to increase terrorism.
Sounds like a good plan to me!
The problem with looking at a market as a whole is that almost nobody sells when the stock has reached the peak value (unless a crash is just about to happen!) so if you look at a large basket of various shares bought twenty years ago, some have gone down, some have gone up, and the long term view you espouse is that the average goes up over time (even if the actual value is volatile) ... but you have to choose every time you want to make a social security payment which stocks to sell to cover the shortfall ... do you sell the poorly performing shares? (only to cut your losses!), do you sell the best performing shares (and lose out on future growth, after all if someone is buying them, they are betting they are going to go up in value!) or do you sell shares that are performing not so well?
There are some very well paid people out there trying to make those guesses now for pension funds and other investment vehicles and (aside from insider trading) it really is just guesswork.
My worry (in summary) is that "the stock market will earn a higher rate of return" may not be true long term, particularly if you're having to take out cash regularly ... and it's clear that governments are really bad at long term investments versus short term "bread and circuses" *precisely due* to the way "democracy" is practiced in the US and UK.
I've just been exchanging emails with a radio show host that believes the US government shouldn't be sending *any* money to the Indian Ocean disaster since it is US taxpayers money and meant to be spent on US taxpayers, and if individuals want to help the Tsunami appeals, then they can each decide how much they want to give without the government telling them. He doesn't understand international trade, international relations or how that precise attitude is one likely to increase terrorism.