Monday, August 16, 2010

Investing in the Stock Market for Early Retirement Is for Dummies

This item was recently posted on an article called How to Retire Early in 5 Easy Steps:

    4. INVEST: The next step is to invest it; the return is worth it. You can double your money in as little as 20 years with a mere 5% return. Considering that the average return of a stock portfolio is around 9% over a ten-year period, it is reasonable to assume that you could net more than double your money in ten years, allowing you to retire that much sooner. As such, not investing your savings, even if it is just invested in a high-yield savings account, is tantamount to throwing away money.
This was the comment that I placed after the article:

    I believe your comment "Considering that the average return of a stock portfolio is around 9% over a ten-year period," is misleading and simply not true. Investing in the stock market will not help people retire early. It will leave them begging for a retirement job.

    I have seen figures like this used a lot by financial advisors, who have nothing but their own self-interests in mind.

    This comes from a recent article called You Wasted the Last 10 Years of Your Life:

    "If you think the stock market is the road to a comfortable early retirement, you're wrong. You may have thought about cashing in on the long-term average annual returns of 7% (postinflation) you heard you could get from investing in stocks, but I'm here to tell you to think again.

    In the past decade, the SPDR S&P 500 ETF (NYSE: SPY), an exchange-traded fund (ETF) designed to track the broad U.S. stock market, returned an amazing -1.4% per year. That's right, negative, as in less than zero. Including dividends. That's a long way from 7%."

    So, based on these figures, one would have been better off to place money in a savings account or even in one's mattress than investing in the stock market."

    I am all for early retirement and believe that one can retire comfortably by the age of 60 but relying on the stock market - as on Social Security - is for dummies.

    Ernie J. Zelinski
    Author of How to Retire Happy, Wild, and Free
    (Over 125,000 copies sold and published in 9 languages)
    and The Joy of Not Working
    (Over 250,000 copies sold and published in 17 languages)

In response to another article called Debt Is the Number One Killer of Early Retirement Dreams, I posted this comment:
    You state, "Debt is the number one killer of early retirement dreams."

    I disagree with you.

    You should have said, "Death is the number one killer of early retirement dreams."

    Many people end up dying on the job before they are able to take early or late retirement.

    On the other hand, I agree with you that debt is detrimental to retirement. If you are retiring with any debt, you aren't ready for retirement.
Note: The article mentioned on the top is available at How to Retire Early

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