Many people stop investing in stocks in their 50s and begin channeling their money into safe and low-risk financial avenues like bonds and savings accounts. However, if you want to beat inflation and maintain your current lifestyle, investing in stocks is necessary. Let’s take a look at 5 reasons why you need to invest in stocks even past the age of 50 years:
Higher returns: In the past, earning decent returns from just your savings bank deposits was possible. However, at present, if you only put your money in bonds and savings account deposits, your returns will not be able to outpace inflation.
Not all stocks are volatile: Many people shy away from investing in the stock market because they assume stocks are extremely volatile. While stocks are riskier than cash and bonds, there are plenty of stocks that offer steady returns. If you are a risk-averse individual, consider investing in large-cap companies, which have steadily given investors good returns.
You started investing late: When you invest in the stock market, your returns start to grow significantly, thanks to the power of compounding. If you’ve stayed invested for a number of years, you probably have amassed enough wealth to take a more conservative investment approach during your 50s. On the other hand, if you start investing late, your investment portfolio may not have been able to grow enough. If this is the case, it’s a good idea to stay invested and continue buying stocks.
Markets pick up after a crash: If you are worried about losing all your money in a stock market downturn, remember that market crashes are inevitable but the market eventually picks up. So, if you do stay invested, you are likely to make back what you lost and much more.
You may still have dependents: If you have children or a spouse that is financially dependent on you, it’s a good idea to keep investing in stocks so you can accumulate more wealth, which will be sufficient to take care of your financial responsibilities and your dependents.
As you grow older, it is important to invest cautiously. So, while your portfolio need not have only stocks, you shouldn’t reduce your stock ownership down to zero either. A well-diversified financial portfolio that also includes stocks is the best of your financial well-being.
