Dow Jones Reaches Record High, But Is Your Money Safe?

by Phil Cannella

Many news outlets are reporting this morning that the Dow Jones Industrial Average has reached a record high (here’s the New York Times’ take on it).  Five years ago, the Dow Jones closed above 14,000, and today it has shattered that record.  But does that mean everything’s fine now, and that it’s safe to put your money at risk on the stock market again?

I would say no.

At times when the stock market is up, people tend to feel more confident investing in it, and with good reason.  A rising stock market can mean outrageous profits for those who are willing to roll the dice and take on some risk.  Buy what about people who are in or near retirement?  Should they be gambling on the stock market at this late stage in life?  I don’t think it’s a good idea, and if you have an advisor who’s telling you to stay on the market, he’s probably not looking out for your interests.

That’s because of volatility.  As we’ve learned countless time in history, the market goes up and down, and it seems to have a mind of its own.  Just because it’s at a record high right now doesn’t mean it will still be there tomorrow.  Investors learned that the hard way, first in 1929, then again at various times throughout history (the latest being the 2008 crash).  Those events really go to show you that the stock market can easily wipe out everything you’ve saved within a matter of hours, sometimes even minutes.  When you’re getting close to retirement, that’s a risk you simply can’t afford to take.  Unlike 20-something investors, you don’t have another 40 years ahead of you to get back the money you lost.  That’s why you need to be thinking about safer investments the closer you get to retiring.

The stock market gives no guarantees.  That’s why I don’t recommend or sell securities to anyone at any time.  Securities include not only stocks, but also bonds, mutual funds, and even variable annuities.  Investment vehicles that carry risk are simply not appropriate for people in or near retirement.

So my advice is simple:  Don’t trust the headlines today.  The stock market may be up now, but who knows where it will be tomorrow when you wake up.  Retirement is not the time to take  unnecessary risks; Retirement is the time to get out of the risky securities market, and into financial vehicles that are guaranteed.

Phil Cannella is founder and CEO of Retirement Media, Inc.