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Have you Lost all Confidence in the Stock Market?

Last updated by on 10 Comments

Earlier this year, I decided to do a series of posts on getting started on investing – an investing 101 guide, of sorts. This all got started when I ran a personal finance class at work and asked the question, “how many of you invest outside of your 401K?”.

Out of a group of 30 twenty-somethings, zero people raised their hands. ZERO!

That shocked me, and I decided that I wanted to help readers overcome some of their big objections or fears on getting started investing.

The series included:

  1. Investing outside of a 401K: I polled readers on why they haven’t invested outside of a 401K.
  2. Should you pay off debt or invest? I took a look at where you should focus when you have discretionary income.
  3. How to start an online broker account: I discuss where to start your investment account.
  4. Getting over the fear of investing: I highlight the danger of not investing.
  5. Passive index investing: I discuss one of my favorite investment strategies for amateurs.

I’ve also covered some additional investing basics in the past:

But one thing that I don’t think we’ve discussed enough is our confidence in the market.

Our generation has grown up watching the stock market lose money, as a whole, over the last 12 years. Before that, it was just expected that you could invest your money and pull in 10-12% annually, on average. Automatic, invest it and forget it, and retire a rich woman/man.

But those days are seemingly gone. Our stock markets have been heavily influenced by:

stock market confidence

  • the media
  • war/terrorist acts
  • institutional/professional investors
  • energy prices
  • political turmoil
  • debt crises
  • the global economy
  • currency drama
  • computerized trading

And watching all these manic fluctuations and no net gain in over a decade has really destroyed our confidence in investing in the market.

It just occurred to me as I was sitting and thinking about barriers to investing that this, possibly more than any other issue, is why our generation hasn’t jumped to be active investors.

So, I want to throw the questions out to you:

  • Have you lost confidence in the stock market? (take the poll)
  • Why do/don’t you have confidence in the market?
  • What would it take for you to have more confidence in the market?

Have you Lost all Confidence in the Stock Market?

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About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You can also explore every post I have written, in order.

  • sBono says:

    The inability of our government to be financially responsible is what makes me uncertain and lack confidence in the market.

  • Brian says:

    When I look at a graph of the stock market performance over the past 60 years or so, there are two different stories. Up until the late 90s, there was steady growth. While there were small ups and downs, the overall trend was growth. Looking at the past 10 years, the ups and downs in the market are huge! The graph during the past ten years look completely different than the previous 50 years.I feel like there are new forces at work like high frequency computer trading that are changing the stock market, and I just don’t really trust it anymore.

    When someone tells me that my money will grow over the next 40 years in the stock market because that’s what it has historically done, I am not really sure what to think. How can you point to the past as an indication of the future, when what happened these past ten years has never happened before.

    Personally, I do put my 401k and Roth IRA in the stock market and I cross my fingers. The rest of my money is in high yield CDs that can be broken at any time for a very small penalty.

  • TaJ says:

    I have to say I have no confidence in the stock market. This is not to say that I don’t invest in it, or make money in it. However, having taken the time to actually learn a lot of the history behind how investment works, and look at the way things are currently going, I understand that the market as it currently exists is more of a sick joke played on an inexplicably credulous public than any actual function of capitalism. Manipulation and fraud are not merely rampant, but acknowledged and unpunished. And the fundamental assumptions that most people hold about the market are grievously mistaken.

    What it would take for me to actually be confident again, as opposed to merely laughing derisively at each new assertion that “this time it’s different”? An end to HFTs, full transparency or ban of all opaque derivative instruments (including many ETFs), prosecution of fraud by financial service executives.

    Well, and a private (corporate+household) debt level closer to the long term average. If you want to know why nothing seems to be working to revive the economy, you should look at the graph of private debt:GDP…

  • Raven says:

    Haven’t lost all confidence, just don’t feel comfortable with the wild swings. I’m still in my 20s (for another 25 days), my wife is only 18 mos older, so we’re in buy/hold mode mostly. Max on IRAs which is obviously in the market, a few hundred into various mutual funds outside of retirement so we get more than the pittance our savings account could get us. I own some specific stocks on my own outside of mutual funds, but those are hobbies/learning about the market and the factors that drive them–essentially limited to about 25-33% of my portfolio for me to just play with.

    We have a chunk of cash in our savings just sitting there since I’ll be losing my job in a few weeks and don’t want to run the risk of drops in the market when I need to tap into it for bills. That’s where the true lack of confidence lies for me–not wanting to put any near/mid-term (6mos-2 yrs) in the market. Too much volativity.

  • Leah says:

    I’m not very confident in the market in the short- to mid-term– say the next 5-8 years. I’m very confident, however, that by the time I retire some 40-50 years from now (depending on Social Security, retirement age, etc), that we will see a generally upward trend that is more favorable than the current return on a CD or bank savings interest rate.

    I also invest outside my 401(k) and have invested in stocks and mutual funds since high school-ish. That may shape my opinion.

  • Mike says:

    Because of computer trading and the lackluster economy, the stock market sucks right now.

    I decided to hold off on the market until it crashes again. I’ve been investing in a guaranteed plan that gives me 4% interest per year with additional dividends that bumps it up to about 7% tax-free. If the market tanks again like it did in 2008-2009 I’ll probably borrow off my plan and buy some more stocks.

    Good luck to the brave stock investors out there.

  • ProfitsOn says:

    Good point! Lack of confidence is emerging.

    Apparently, the stock market (economy) is in a different cycle. It started in 1999/2000.

    During the past 100 years, the DJI topped 3 times (1929/1965/2000).

    Following this tops, the market moved laterally for 14/17 years before climbing again.

    The DJI topped/bottomed roughly every 4/5 years within these lateral movements.

  • Micah Warren says:

    There was a paper posted a couple months ago

    by some Fed economists which suggests that the upswing in the market over the last 30 years is due to baby boomers, having paid off their homes and earning good income, dumping money in the stock market. This trend is reversing. They suggest there may be negative returns over the next decade or so. Nonetheless, every financial website is promoting the idea that 10% returns are likely in the long term. I think that even 6% is out of the question over the next decade.

    Also keep the following in mind. Eventually, our tax code will wise up and start taxing capital gains like ordinary income, so you may be looking at 50-60% marginal tax rate on your investment when you decide to cash out.

    For this reason I think anyone looking long term should focus on paying down debt, especially anything over 5%.

  • Daniel Whitted says:

    I agree with your points about the public’s lack of confidence in the stock market. It’s hard growing up in this period and still being able to overcome that fear and invest in the market. However, it is essential that one invest outside of their 401k so as to ensure that there will be enough funds come retirement time.


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