Why learn to invest? Here are some examples from recent history to emphasize the benefits of learning how to invest.
In 1973-74 I was a new stockbroker. The economy went sour and so did the stock market. People lost their jobs, including many in the investing industry. Most folks who had money invested lost their shirts in the stock market as well. The few who didn't knew how to invest in other alternative investments. Others made money selling stocks short, betting that stock prices would fall.
From 1982 through 1999 things were good for most Americans, especially for investors. The stock market was on a long upward trend, the greatest bull market in history. Real estate investing was profitable also. You didn't really need to know much about how to invest to make money in those days. All you needed to do was to invest. Unfortunately, the good times came to an end, and few folks had really bothered to learn much about investments or the art of investing.
Uninformed investors got nailed in 2000-2002 as the stock market took a beating, especially stocks in the high-tech sector. Many workers lost high-paying jobs, and at the same time watched as their pot of gold in the form of company stock options evaporated before their eyes. Employees continued to hold onto stocks in high-tech companies even as they lost over 90% of their value. Again, knowing how to invest could have helped a lot of people make the best of a bad situation.
Then came the economic crisis of 2008-2009, which put millions of people in double jeopardy. First, they lost their jobs. Second, they lost about half of the money they had in retirement plans like the 401k and IRA.
You can not count on job security, especially in times of economic and financial crisis. You can, however, protect your financial assets and avoid big losses in your investment portfolio. In fact, you can even make money in bad times if you have an ace in the hole...knowledge of investments and experience in the art of investing.
I actually made money investing in 2008, and it was not easy. The years 1973 and 1974 opened my eyes to what could happen to those who did not know how to invest. I decided then that I would learn the game of investing, and I have not stopped learning since.
With an eye on retirement, it's nice to know that although you can not control the future, you can at least manage and invest what money you have to make the best of it.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
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