Quote:
Originally Posted by Biggd
Exactly, we've had a 12 year run up in stock prices. What goes up must come down.
It's only a matter of time before it turns downward.
If interest rates start to rise then be very afraid!
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Stock prices may go up and down but the question is how much and for how long. We suffered a serious drop at the beginning of the year but the markets have mostly recovered. Personally, I finished the year in the black. Not by much but in the black. Some investments finished significantly (10% - 15% up). The worst thing about the market isn't the risk of loss, it is the volatility. If you are traveling along from point A to point B do you want to ride on a highway or a roller coaster? Many people cannot tolerate a roller coaster. It makes them very fearful and sick. These people may put their money in a CD and don't make enough money to keep up with inflation but they KNOW their principle is not at risk. Other people love riding on the roller coaster and KNOW at the end of the ride they will be better off. The risk of the market, for careful investors playing the long game is low. It is the best way to make money in the long run.
2007 was a lot worse. The drop was more significant and it took 5 1/2 just to recover. But the market DID recover and has grown significantly.
I DO worry about interest rates, not directly for myself but for the government debt. If rates spike, the raw dollars needed to pay for the interest will go through the roof, exploding the yearly deficit. Certainly it will also be painful for people trying to buy a house or a car. I was caught buying a house in the 80s when the mortgage rates spiked. OUCH! But a few years later they dropped, I refinanced, locked in a low rate, and got my monthly bill dropped a lot. The lesson is, if you can avoid it, put off buying on credit at times of high interest. Interest rates go down as well as up. Also, ditch your highest interest rate loans as soon as you can. The government doesn't have this option and seems to think that infinitely growing debt is not a problem. COVID expenses are making, and will continue to make this problem much worse.