By Celeste Lohrenz
Following a July 26th announcement from the Federal Reserve Chair Janet Yellen that the Fed would not be keeping interest rates unchanged through later this year at the least, the Dow Jones Industrial Average closed out that day at a new record high.
This caps off half a year of gains for the market, which has already seen an incredibly 25 record highs in 2017. And while investors might be doing well, many Americans are wary of putting their money into the stock market. In fact, half of Americans don’t have any of their money invested in stock or stock-based investments such as mutual funds.
While the stock market can be more risky than other investment vehicles, there is clearly opportunity given current market conditions. But it is necessary to assess your own needs, your financial limitations and your overall savings strategy before you dive in.
If you’re a Milford or Stratford resident wondering whether or not the time is right for you to invest in the stock market, here are several considerations that must factor in to your decision:
How much can you reasonably budget to invest?
The stock market is riskier than investments that guarantee a return. As such, you should not invest unless your budget allows for it. In figuring out what your budget will allow, ask yourself a simple question: how much can you stand to lose before your family’s quality of life is impacted? Answer that, and don’t exceed your limit.
Can you still find great deals in a bull market?
Those who invested prior to the market’s current hot streak will be reaping the rewards now. But eventually, there will be a correction. The market will always go up and down, so maximizing your return is simply a matter of timing. You may have missed the boat on some of the hot tech companies that have seen huge gains this year, but there are likely to be opportunities for companies and industries that have suppressed stock prices for one reason or another, and are due for a bigger close to the end of the year.
What is your overall investment strategy?
Because the stock market is a riskier investment, it is wise to mitigate your financial exposure by counterbalancing the rest of your portfolio with more conservative investments. You cannot ignore the importance of a simple savings account, but there are also plenty of other ways to put your money to work for you, from certificates of deposit to whole life insurance.
At The Milford Bank, we’ve been consulting customers on how to diversify their investments for generations. If you’re looking to learn more about how you maximize the value of your nest egg, stop by any office of The Milford Bank. You can also learn more by checking out our Online Learning Center here.