Now’s a scary time to dive into the stock market. Partially because everyone’s doing it.
Investor speculation has driven low-quality stocks unexpectedly upwards and seemingly at random. A lockdown-fuelled rise in retail trading has resulted in some unlikely proceedings — a surge in GameStop share prices, for example, or a sudden frenzy for cryptocurrency.
But pay little attention to the oddities of today’s investing, says Dan Hallett, vice-president research at HighView Financial Group, an investment counsel firm. What matters is the long-term trajectory of stocks and bonds — investing in either depends on your risk tolerance and your time horizon.
“Very few people have the temperament to invest 100 per cent in stocks and ride the ups and downs, without those wild swings luring them into behaviour that damages their returns over time,” Hallett said. “So you want some mix of stocks and bonds.”
Those who are saving for retirement, for example, would be wise to ignore today’s market in exchange for higher returns down the road, says Hallett. They’ll probably want a portfolio that carries more stocks than bonds.
“Buy some form of an investment fund that has a bit of everything in it. A balanced ETF, for exampleThat’s an easy, effective solution for a lot of people,” said Hallett.
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