Do you really need to be in the stock market?

Everyone knows the benefits of investing in the stock market: higher potential returns. Yet people hesitate - there's uncertainty about how to get into the market, what to invest in, and who to trust. So they procrastinate, leaving their money sitting in a savings account earning 0.1%.

Inflation matters. A lot.

In January, prices in Canada rose by more than 5% from the prior year. This is really high -  normally inflation is around 2%. How long prices will keep rising this quickly is impossible to say. Whether inflation is 2% or 5%, though, the implication is the same: life will be more expensive in the future than it is now.

To illustrate the point, assume that you put together a budget for your retirement years. You estimate that you’ll need $60,000 of income each year in retirement. By the time you actually retire in twenty years that number will be more like $89,000 once you account for the rising cost of living.

Inflation protection

Interest rates paid on savings accounts and even GICs are not high enough for your savings to keep up with the cost of living. The solution? The stock market. Long-term, the U.S. and Canadian stock markets have returned 8-10% per year, on average. This is how your savings can keep up. 

Finding the balance

You don't have to (and probably shouldn't) have all of your retirement savings in the stock market - GICs and bonds play a role too. Deciding on the right mix is important but pretty simple. You can work with a financial advisor or you can learn to do it yourself. There are online questionnaires to help you.

Using exchange-traded funds (ETFs) or mutual funds to invest your savings are simples and highly effective ways to get into the stock market. I can help you figure out the right mix, teach you all about ETFs and mutual funds, and guide you through the process of investing for yourself, providing support and answering questions along the way. If you're not ready to do it all on your own, there are other options like investing through your bank or using a robo-advisor. I can help you with those options too.  

Get in touch with me!