Otherwise why would we complain about burdensome national debt and high taxes while at the same time warning our elected officials to keep their hands off our 'earned' Medicare and Social Security benefits and neglecting as individuals to save and invest properly for our retirement years?
The plain fact is that we have promised ourselves too much for the costs we are willing to pay. And we're going broke doing it --- either that or we're putting the onus on our kids and grandkids to have a life of less opportunity than we've enjoyed.
Take personal investing for the long haul, for example. We're afraid of the market's short term gyrations, so we keep our "investment" money in cash.
Yet we're living longer, so we're going to need more money when we retire. Who will pay for this? The government? Who's the government? We the People, that's who.
Fear of Equities Drives More Investors to Cash tells a scary story about the future prospects for the typical working middle class American of today and tomorrow as well:
"IF a lot of your portfolio is still sitting in cash after a five-year bull market in equities, you’re not alone. Investors at all wealth levels around the world are holding substantial amounts of cash that have increased since 2012. What this means for investors and the markets that depend on their money is intriguing.
According to new research on investors in 16 countries . . . retail investors globally were holding an average of 40 percent of their assets in cash, up from 31 percent two years ago. . . . The United States was in the middle at 36 percent, but that was an increase of 10 percentage points in just two years. The survey ... considered cash to be money held in savings and checking accounts as well as cash equivalents like money market funds.
Despite the run-up in equity markets, people have resisted rushing into stocks and have instead added to cash. They’ve done this regardless of their age or amount of wealth. The study found that millennials who are under 33 and have the longest time to invest their money were increasing their cash positions at the same rate as baby boomers, who will need to draw on their investments soon.
Why is this happening? Suzanne Duncan, global head of research at State Street’s Center for Applied Research, chalked it all up to fear — even though it has been more than five years since the Standard & Poor’s 500 stock-index hit its low. . . .
While fear is propelling people to hoard cash on one end of the spectrum, overconfidence is driving the investments people are making on the other end, the State Street study found. Two-thirds of the investors polled said their best investment was “entirely” their decision, and the investment that topped the list was “buying land or property.”
Yet 45 percent of investors didn’t know what the annual returns on their investments were and 64 percent said they didn’t know what fees they paid.
“They’re disenchanted with what the markets returned, and they’re comparing a physical property to this abstract market return,” she said. “They remember significant pain going through the downturn. But they don’t even know what their returns are on their investments.”With results like these, the study’s least surprising finding may be just how poor financial literacy is around the world. . . .
At 2 percent inflation, for example, $1 million would be the equivalent of $615,000 in 25 years."
Summing Up
Risk is a four letter word. It's everywhere and all the time.
And inflation isn't dead; it's just asleep for a few years.
In achieving long term financial security, the biggest risk to individuals is not saving consistently and not investing regularly in a diversified portfolio of stocks.
That's the way to maintain and enhance inflation adjusted purchasing power over time.
Achieving financial literacy is mandatory if we don't wish America to become just another huge and unproductive European-like "national insurance" company with government bureaucrats running the whole "economic security" debt ridden show.
As individuals and as a nation, we can't get to second base if we're not willing to take our foot off first.
Risk is. So is opportunity.
That's my take.
Thanks. Bob.
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